Standard residential mortgage or not?

[Mpg]

Hello knowledgeable folk

We've seen a house that we love.
Its valued bang on market value of £350k.

However the current owner has been running a successful Cattery business from there.

They are selling the home and walking away from the business as they are wanting to retire.

The cattery has been run on a sole trader basis. Not on any title/deeds.
Its been on site for 40 yrs with the current owners running it for the last 9 years.

It is separate from the house in that it is fully self contained but within the same plot as the house.
The garage has been converted to house storage and the business reception area. The bottom of the large garden has been converted to house 20 odd pens that can house 46 cats. Over the years these have been converted to solid construction

However we are getting a few different stories on whether or not we can just get a normal residential mortgage as the current owner is not "selling" the business but giving it away with the house.

Any ideas
Thanks

 

[PaulThompson]

Would you be maintaining the business or converting back to residential?
What does the planning permission say the property is? (residential or commercial?)
If it's not mentioned in the planning then I think it's a resi case... maybe Tony can help here?
If it is commercial it might prove difficult if there are no accounts, give me a shout if you want an independent opinion.

 

[kevin.doran]

@tony84

 

[PaulThompson]

I didn't know you could do that, thanks @kevin.doran

 

[tony84]

I seen this post on another forum. Which I avoided answering as It is not something I have ever done before so im not overly confident.

I suspect this could be one of those things that could fly through or become a right mess to try and sort out. It would need some ringing around the lenders just to see what their stance would be.

I imagine there will be lenders who at the very least would value the property with a view to you going in taking down the signage/removing the hutches (whatever they are called) once you have exchanged contracts and then having it revalued (typically the second valuation would just be an admin fee of around £70)

Alternatively a bridge, get it all sorted and then a mortgage on it.

But in saying that, there could just as easily be a lender who would go straight to offer on it.

I think it will depend on whether the land is commercial land or residential. How much of the land is taken up as commercial (I think if its less than 40%) then some lenders will be fine with that and just issue an offer on it assuming your finances/credit stacks up and the property values up.

 

[tony84]

I didn't know you could do that, thanks @kevin.doran

Ive just had a notification to say your following me... Im really not that interesting.

 

[Mpg]

We would continue to run the business. I would also make use of the converted garage as an office for my existing business.
Converting back to residential would mean knocking down the pens at the bottom of the garden with the effect of having a larger garden. The Garage/office is detached and to the side of the house and the Cattery pens are at the bottom of the garden.

I think the current owner got round any issues with a residential mortgage and paid £100 cash for the business.

 

[Mpg]

Snip

I don't know why my first port of call was that other forum.

The land is residential. Its a large Victorian house on a residential road. With large gardens that have been fenced off and the Cattery business is at the bottom of the garden, apart from the converted garage. It wont be anywhere near as large as 40% the Cattery part probably only takes up as much room as the front garden/Driveway.

 

[tony84]

It could be possible then.

I think to get this through it would be a good idea to speak to a broker. Alternatively you could jump on the phone to some lenders yourself and ask the question, but thats probably more time consuming.

I was just on the nationwide site and was looking at property details - cattery speciifically comes up as something they would not lend on.
http://www.nationwide-intermediary....y_and_construction/part_commercial_properties

But they do lend on some part commercial properties - so I do think there may be some lenders that would do this.

 

[PaulThompson]

How much of the land is taken up as commercial (I think if its less than 40%)

Yes - it is 40%

 

[Mpg]

House
House cattery

Aerial view
Red is the cattery
Cattery

A reverse image search on the 1st pic will pull up the details on google

 

[PaulThompson]

Looks like a regulated mortgage @tony84 - over to you.

 

[tony84]

It does.
Im not sure there is much to add from the above though. Its possible but probably not quite straight forward.

Im not actually taking on any new business until December but if your struggling to find a decent broker give me a shout I can put you in touch with a good lad who will be able to help.

 

[Pish_Pash]

House
A reverse image search on the 1st pic will pull up the details on google

I can't add anything to the discussion, but I wasn't even aware of a reverse image search...sure enough it worked a treat.

I'm looking for a cattery business in the Lancs locale & will now gazump you (just kidding - I hate cats!), but your info about reverse images certainly shows that it's not safe from a privacy perspective just to post a photo minus supporting text anymore!

 

[Mpg]

Thanks for the advice.

I'll start with a local broker and see were I get.
Again Thanks

 

[fs2000]

I don't think anyone will lend in this. It's falls in between commercial and residential. Resi lenders won't lend as it has commercial element to it and commercial lender won't lend due to it having a residential element and fall into a regulated mortgage area. Lenders hands are tied due to regulation nothing else.


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[Mpg]

So would the best option would be for the business to cease trading.
The vendors are not selling the business they are walking away from it.

if the house was for sale that had a garage in the rear that a mechanic had been trading from but I wanted to use it just as a garage for storage would we have the same issue.

I run a business from home now (spare room is my office) Would you expect me to have an issue when selling

 

[Mpg]

Just to add the business has zero value.

 

[tony84]

Running a business from an office is fine as it is less than 40% of the property size but also very easy to pack up - laptop/printer/etc in a box job done.

Making material changes to the property (pens for the cats/signage/etc etc) can be problematic.

I did some reading up on this, I think there will be lenders for this but I think the chances of getting a high street lender on board is quite slim. It would always come down to valuers comments but I think there are lenders who will do it.

 

[Mpg]

Its being marketed as just the house.As the current owners don't want anything for the business.
Would this be more straight forward IF we only wanted the house and weren't interested in running the business.

Its the house we really want. Just the cattery would have been a nice 2nd income. But would rather close the cattery if it stops us getting the house

 

[fs2000]

If you go to a resi lender the valuer will comment on the current use and the lender will want to ensure prior to completion all elements of buiness removed. Using part of the house for home office is not an issue with lenders nowadays.


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[Mpg]

If you go to a resi lender the valuer will comment on the current use and the lender will want to ensure prior to completion all elements of buiness removed. Using part of the house for home office is not an issue with lenders nowadays.


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Could that be something as easy as splitting title and us buying the cattery side for a nominal cash amount.

 

[fs2000]

This is a possibility as long you can split this and does not effect the value of the property it can be done.


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[tony84]

I think there are going to be a number of ways of doing it, all have their pros and cons:

1) Bridging loan for the purchase, get the property in a position where any lender will accept it and then take out a mortgage to pay off the bridge - Pros- your in there sooner. Cons, Bridging loans are expensive.

2) Find a lenient lender - pros, you save on the bridging loan costs, you get in there in the time it takes to complete a mortgage. Cons, most likely not going to be high street rates.

3) split the deeds - pros, high street lenders are likely to accept the property. Cons, it will take time and there will be costs involved.

For me I would be thinking option 1 or 2. Option 1 will have higher upfront costs but following that I would expect normal rates and if nothing else any retention deals that lender has for as long as you need a mortgage.

Option 2 will have lower upfront costs but higher monthly repayments I imagine. It may also result in any future mortgages being more expensive.

 

[Mpg]

I think there are going to be a number of ways of doing it, all have their pros and cons:

SNIP

Thanks Tony

Were planning on making it our forever house so getting the property is the most important bit.

 

[Karimbo]

Are you intending to run the cattery? I bet the neighbours hated that.

Get the previous owners to turn the structure into a shed. Should be easily done. Don't take the business over, a business with £0 is still a business. Get them to dissolve it

 

[Mpg]

Are you intending to run the cattery? I bet the neighbours hated that.

Get the previous owners to turn the structure into a shed. Should be easily done. Don't take the business over, a business with £0 is still a business. Get them to dissolve it

Its a cattery not Kennels. It doesn't smell and it barely makes any noise. (I've put our cat in there when it was busy)

Would a quick and easy solution then be that they just close the business and take the sign down. Then all we have left is a converted garage and some pens at the bottom of the garden.

 

[Karimbo]

Its a cattery not Kennels. It doesn't smell and it barely makes any noise. (I've put our cat in there when it was busy)

Would a quick and easy solution then be that they just close the business and take the sign down. Then all we have left is a converted garage and some pens at the bottom of the garden.

im not expert on this topic, it's just a guess. If there was no planning permission in place it would be as simple as that, however if a planning permission was sought, and on the permission it listed it as a business/agricultural use then it will remain a commercial property regardless of signage.

Any structures involving bricks and mortar generally do require planning permission as they are permanent.

It's in the interest of the previous owners to get the building changed from commercial to residential as it will affect sales from all propspects, not just you.

 

[Mpg]

As far as I'm aware no planning permission. The cattery has been there for 40yrs. Non is brick but rather wooden and precast concrete shed panels. I believe it was originally in normal wooden sheds that have been upgraded/repaired throughout the years

The current owners have a residential mortgage on the property.

 

[Mpg]

Slight update. We've heard that nationwide would be interested but may have to put a larger deposit down. And that we couldn't use the cattery as a cattery.

In reality what does that mean?

 

[tony84]

Whos told you that?
Im not doubting you but when their criteria specifically states something (I posted the link earlier in the thread) I have never know a large lender to bend their rules like this. Some smaller lenders do if they have too much money to lend or the rest of the case is a good one.

 

[Karimbo]

Whos told you that?
Im not doubting you but when their criteria specifically states something (I posted the link earlier in the thread) I have never know a large lender to bend their rules like this. Some smaller lenders do if they have too much money to lend or the rest of the case is a good one.

to be honest, the structure is essential a shed, which can be modified very easily to change from a cattery to a home working space. Would be a different story altogether if it was a "permanent" structure with planning documents at town hall classifying it as business premisis.

 

[tony84]

If the business is going I dont see an issue. If its remaining, it doesnt really matter what the structure is, the fact its there is going to have some impact on the resale of the property (in a lenders eyes). Also that they specifically mention cattery and kennels means its something they feel the need to mention.

Im not saying it will not go through, but I find it hard to believe it will do.

 

[Mpg]

Update:
Vendor has had plans drawn up to separate deeds(similar to the ovehead shot on page 1) on completion.

We've made an offer that has been accepted. A lower offer for the House but a x2 net profit offer for the business. So in total full asking price.

We made a full asking price offer because we need a little le-way. We have an AIP but they wont commit until they see this years final accounts. Yr end 31st march.

So to get the ball rolling we have started the legals (I'm prepared to lose the £600 odd if it doesn't go through)
However looks like the EA didn't fully explain this to the vendor who thinks we will be exchanging contract MUCH earlier. He wants us to arrange for the survey (valuation) asap.

In itself I don't have an issue with this. As it will give us a final answer on whether or not the lenders will see the business as an issue. (with the split in deeds 3 Lawyers and 2 FA/MA have said they doubt it will be an issue). Our worry is that as soon as we start the process the Lender will arrange the survey but then want to see all the other info. SA302's wont be available until early April. Which may cause our application to to closed.

Any recommendations on how to proceed.

TL;DR
How long from starting mortgage application to lenders closing application due to lack of info


Thanks

 

[ethical PR]

Would the solicitor you are using to buy the property not be best placed to advise you?

 

[PaulThompson]

If the vendor is going to have a problem then an alternative lender for the business part would be easy - you have 2 years figs, that's plenty!!


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[Mpg]

If the vendor is going to have a problem then an alternative lender for the business part would be easy - you have 2 years figs, that's plenty!!

We're paying cash for the business. I think its the worry that even though its all being split and "shouldn't" be an issue with the lender it still might.

From my point of view he either waits with us. Or declines our offer and we'll come back in April (if its still on the market) with a new lower offer.