Getting change of use on a pub and a mortgage

beeswax_3

Hi

A complete newbie here. I was just after some advice and thoughts. Sorry for the long post.

I've seen a pub for sale, it hasn't been lived in/open for over 6 months but is still rated as a commercial property (A4), with a separate council tax rating for the accommodation over. It is also Grade II listed, the listing is not an issue and does not bother me so I don't need advice on this!

I have applied for pre-application planning advice to see if a change of use would be forthcoming. I'm waiting for a reply. A few problems here:
1. If they say yes (which is highly likely), then I would need to apply officially for change of use, despite not actually owning the property
2. Supposing I get change of use, then there is nothing stopping the vendor now upping the price or someone else gazumping me, because the property has immediately become more desirable. By doing all the legwork and paying in advance I'm very likely to lose out - change of use applies to the building and not the person who has applied for it.

The trouble I have is that I don't see how I could possibly get a mortgage. My current lender will not transfer my mortgage to a commercial property (its a fixed rate and I would incur a hefty early as penalty as well !) Assuming I cough up the early repayment and try to take out a commercial mortgage with someone else - this is also a problem, I have no business plan because I have absolutely no intention of running a business at the property. And the previous two years trading books will be rubbish as the pub is not viable as a business. So I'd be very unlikely to get a commercial mortgage. Even if I did I'd only need it until I got change of use - then I would change to a residential mortgage. Wherein a new problem arises, my bank said that even if you get change of use they would not mortgage an old pub until after it had been converted into a dwelling (despite there being living accommodation there already!) I think this may be a load of guff on the part of my bank to be honest.

All I can see is that the value of the property would treble once you had change of use and had revamped the downstairs (for not very much expenditure) - so how do I go about finding a mortgage lender who can also see this?

By the way, a bridging loan is out of the question as will be far to expensive to finance.

Any ideas?

Thanks

beeswax:)

ILW

You need to secure the property before getting change of use. As you say, as soon as it is granted the value will rise significantly and someone else will probably buy it. Surpising thing is that existing owner hasn't already done it. If it a rural pub it is virtually impossible to get change to residential.

Thrugelmir

beeswax wrote: »

Hi

A complete newbie here. I was just after some advice and thoughts. Sorry for the long post.

I've seen a pub for sale, it hasn't been lived in/open for over 6 months but is still rated as a commercial property (A4), with a separate council tax rating for the accommodation over. It is also Grade II listed, the listing is not an issue and does not bother me so I don't need advice on this!

I have applied for pre-application planning advice to see if a change of use would be forthcoming. I'm waiting for a reply. A few problems here:
1. If they say yes (which is highly likely), then I would need to apply officially for change of use, despite not actually owning the property
2. Supposing I get change of use, then there is nothing stopping the vendor now upping the price or someone else gazumping me, because the property has immediately become more desirable. By doing all the legwork and paying in advance I'm very likely to lose out - change of use applies to the building and not the person who has applied for it.

The trouble I have is that I don't see how I could possibly get a mortgage. My current lender will not transfer my mortgage to a commercial property (its a fixed rate and I would incur a hefty early as penalty as well !) Assuming I cough up the early repayment and try to take out a commercial mortgage with someone else - this is also a problem, I have no business plan because I have absolutely no intention of running a business at the property. And the previous two years trading books will be rubbish as the pub is not viable as a business. So I'd be very unlikely to get a commercial mortgage. Even if I did I'd only need it until I got change of use - then I would change to a residential mortgage. Wherein a new problem arises, my bank said that even if you get change of use they would not mortgage an old pub until after it had been converted into a dwelling (despite there being living accommodation there already!) I think this may be a load of guff on the part of my bank to be honest.

All I can see is that the value of the property would treble once you had change of use and had revamped the downstairs (for not very much expenditure) - so how do I go about finding a mortgage lender who can also see this?

By the way, a bridging loan is out of the question as will be far to expensive to finance.

Any ideas?

Thanks

beeswax:)

Best left to either a property developer or someone who can purchase the property as is for cash.

Lots of pitfalls with a project like this. Change of use , yes. Modifying a Grade 2 listed building into a house , lots of expense. Approval will be required for alterations.

LadyLawyer

Hi there
You can exchange contracts subject to receipt of planning...so the contract is conditional upon your getting planning permission for the property, then take a short term and resell. There are commercial lenders out there like the Hampshire Trust and some high street lenders also do them - try RBS/NatWest for a start. You may be able to secure a further charge against your existing property with your own bank too.

LadyLawyer

Sorry just had another brainwave - take an option over it? It's an agreement that the seller will sell to you if you serve a notice on him with a period of say 12 months, you can agree it for something like £1,000, and then get the planning. You then have the option of buying it if you want to whilst being sure about the planning situation. This is not infallible, however, because the planning will attach to the property and not you so if the option expires and you have neither taken in up nor extended it, someone else gets the benefit of the planning.

Running_Horse

ILW wrote: »

If it a rural pub it is virtually impossible to get change to residential.

Are there any examples of rural pubs being forced to stay open? No planning department can force a loss making business to trade. Just shut the doors and live in it. Plenty of former pubs being used as homes in this rural area, even if it is a shame.

beeswax_3

LadyLawyer - vendor will not sell unconditionally. I don't know what you mean by take an option over it, could you tell me what this means. Thanks.

Running Horse - as I said change of use is unlikely to be problem. I had thought of buying and just living in it, but you still have to pay business rates and utilities - I'd rather avoid this.

Thrugelmir - as I said Grade II is not a problem. I want the house because I love it and intend to stay for the long term!

beeswax_3

LadyLawyer - sorry, that should say "vendor will only sell unconditionally"
;-)

LadyLawyer

Hi beeswax
Well if the vendor won't sell unconditionally it means he is ruling himself out of a large part of the markety i.e those would need to borrow to fund the purchase/development or those who would insist on doing so as a business venture because of tax set off rules.
An option agreement is a contract between you and a vendor stating that you retain the right to buy the property at a particular price so long as you exercise the right within that given period. They tend to be used in transactions where the parties involved are not sure of being able to get planning or maybe need to buy several pieces of land altogether to make a development work, so need to take options over all of them before planning is ok'd.
Does the agent have a creative view on this, or is it "deal or no deal"?

Thrugelmir

beeswax wrote: »

Thrugelmir - as I said Grade II is not a problem. I want the house because I love it and intend to stay for the long term!

I think you are dreaming at the moment, rather than investigating the realities of converting a Grade 2 listed building into a residential residence.

All I can see is that the value of the property would treble once you had change of use and had revamped the downstairs (for not very much expenditure)

LadyLawyer

There are plenty of Grade II listed houses, and Grade I as it goes - the planning restrictiions concerning external appearance are more stringent but if you love a property the way it is then that is not necessarily a huge problem. You need to get hold of a copy of the notice of listing to find out why the property was listed in particular. Try the local authority or English Heritage.