Solving a Property Classification Dispute

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Our client is a highly experienced businessperson and landlord who owns a number of properties around the London area. In addition to a portfolio of UK properties, they also have ownership of properties abroad.

This client is fastidious with the upkeep on all of their properties, which attract strong demand and, as such, provides the opportunity to select reliable tenants.

The Property

A beautiful mid terraced three-storey period property which consists of six studio flats. This property was fairly unusual in that the units were largely separate, but still shared some facilities. As a result, the client was informed that the property required a HMO licence, which he had successfully applied for.

The Finance

The client was rate-conscious and wanted to reduce the high interest rate that they were currently paying. In addition, they were also keen to raise additional funds, which would be used for additional property investment.

The funds were to be drawn down and held on account until the perfect property was found, allowing him to react quickly when an opportunity arose.

The Challenge

Our client had an HMO licence but there were a couple of issues surrounding this. Firstly the license had expired due to the local council being so short staffed and behind with their paperwork. Secondly, the valuer classed the property as C4 (HMO up to six people) however the lender searched the council planning and found that it was actually showing as C3 (single family dwelling).

After a lot of investigation it was found that when the client purchased the property it was correctly classed as C3, the client then applied for the license when they converted it into an HMO for up to 12 people.

C4 classification was not in existence when the client purchased the property (nor would it have been applicable due to the amount of people in residence) therefore it was deemed “Sui Generis”. This lead to a lot of confusion and put the lender in a difficult position, unable to release funds unless they could be sure that the property was being used correctly.

This problem had to be closely managed, to ensure a solution could be reached that would allow the lender to release funds. Constant liaison between the surveyor, lender, council and client had to be managed to ensure the problem was resolved before the mortgage offer expired.

This was successfully managed by our team, which allowed the client to complete their application and continue with plans for further property investment.

Finance Terms

  • Loan Amount – £1,175,000
  • Combined Valuation – £2,200,000
  • Rate – 5 year fixed at 4.53%
  • Term – 10 years
  • Monthly Payment – £4,491.07
  • Repayment Method – Interest Only
  • Lender Arrangement Fee – 1.5%

About The Author

Lee has built a wealth of knowledge and expertise within the commercial finance sector and has sat on the family management team since 2007. His knowledge of the complex residential investment market led to our growth in the HMO and commercial property investment markets. Lee combines his work on HMO and complex investment properties alongside his work in the bridging loan, commercial mortgage and development finance markets.

Lee Hemming CeMAP  -  
Sales Director

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