Residential mortgage with internal door locks

by Readers Question

4 years ago

Residential mortgage with internal door locks

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Residential mortgage with internal door locks

We think this might be a unique problem and want some advise please.  Residential mortgage with internal door locks

We went to view a house which was a Care Home 18 months ago. The Care Home has moved but the property is still owned by the Care charity. We really liked the house, made an offer and the offer has been accepted.

Onto the mortgage that has been underwritten by Santander who have instructed a valuation. Our current house is going to Let to Buy where we got a BTL mortgage (with Nat-West) underwritten and waiting for valuation.

Problem #1

The house we viewed is now let by an organization as multiple rooms to different tenants. All the rooms have locks on doors. The valuer thinks that this might be getting a residential mortgage but letting out rooms. However, that is NOT the case, we are going to live there … but the bank wont accept it). My financial adviser has called most  lenders and they appear to have the same view and have said a residential mortgage request might be rejected.

The vendor is not willing to vacate tenants and remove locks for fear of losing money (nothing wrong with them, after all they are charity).

My Financial advisor said Halifax is OK with the locks on doors but repayment is £50 more than to Santander. Also we would have to pay another valuation fee of £500 and our worry is that the valuer might think and write the same as Santander’s (free of cost) valuer.

Problem #2

The property is designated as commercial property and the vendor’s solicitors are going to apply for change of use. However, this is not done yet and the bank views this as commercial property. This was not in the instruction by the Estate Agent and we thought it was a residential property, probably with HMO license.

Now the question of what we can do to proceed?

What are the steps we need to take to make that house our home?

I was thinking of having direct talks with bank (through financial adviser if needed) to get the conditional offer of mortgage provided we use the property solely for residential purposes, remove all the internal doors’ locks within one month of moving in and submitting the receipt of the locksmith who did the work (yes we are ready to spend that money).

Please help us with this strange situation.

Many thanks

Prakash



Comments

Mark Alexander

4 years ago

Hi Prakash

I can also envisage another problem, i.e. your residential mortgage lender will want you to buy the property with vacant possession.

I suspect the solution is one that your solicitor might be able to arrange. He might be able to organise an arrangement which is mutually acceptable to the vendor and Santander as follows.

A conditional exchange of contracts with completion being conditional upon the property having vacant possession and no locks on doors.

Good luck!
.

matchmade

4 years ago

I agree with Mark: my experience over the last 20 years is that if you expect to be offered a residential or buy-to-let mortgage, the legal requirement is that you will need to get all the tenants to move out (hence "vacant possession"), even if it is just for one night. They could stay overnight with friends or in a hotel, and then move back in after you complete the sale. The cost of this should be borne by the charity - it is they who are trying to sell this commercial property with resident tenants to a residential buyer, so it is they who should pay for the tenants to move out and so provide the required vacant possession.

This process might take some time as the charity will need to give the tenants notice to quit, even if this is accompanied by a letter from you guaranteeing that the tenants can move back in, albeit as lodgers since you will be a residential landlord living with them. In addition, securing a Change of Use from a commercial to a residential category with the Planning department is probably going to take at least two months, and may encounter some opposition from the council because you are taking a viable commercial property off their books, with a potential impact on employment and business rates. Commercial-to-residential conversions are not simply waved through: it depends on the area.

You should also arrange to remove the locks in-between exchange of contracts and completion, or within one month if allowed by Santander or Halifax - and only re-install the locks if this is allowed for lodgers under the terms of your mortgage.

If the tenants complain about the loss of locks, you will just have to say that these are the terms of what you are offering them, and if lockable doors are essential to them, they need to look elsewhere.

Having lockable rooms is a risky approach in a shared house and can get you into all sorts of trouble with Planning and the Valuation Office. Either party might decide you are really operating a commercial lettings establishment, force you to get an HMO licence and charge separate A-band council tax on each bedroom, which will be extremely expensive. This topic is discussed extensively elsewhere on this website.

Maggie King

4 years ago

Is it possible that the property, being commercial is being protected from squatters buy an organisation such as Camelot. It might be worth asking the sellers. Good luck.


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