Mortgage refused because outline planning permission is on the land

Planet9

Hi all,

Wondering if anyone has ever come across this before?

We have a mortgage fully agreed by Santander and a separate surveyor (our own Home Buyer survey) has said the property is worth the offer we have had accepted by the vendor.

However, when Santander's surveyor visited the property he has noted that there is outline planning permission on the land (it's part of the large gardens) for two 3 bed detached houses and has therefore tripped a clause in Santander's lending criteria that says they won't lend on a property that has planning permission - outline or otherwise.

I can't find any info on this online, our broker and solicitor have never come across this before with Santander, and I can't find anyone else online who has ever come across this issue or even written about it to see if there are options!

We are not going to build on the land as we want it for our three children to enjoy but with 12 months left on the planning it's going to lapse any time soon.

My broker is seeing if Santander will accept a clause where we agree not to build or maybe see if they will review their decision if we get the planning permission revoked before completion.

We have a long lead time from exchange (end of this month hopefully!) and completion (August) so we have time on our side.

Has anyone ever heard or come across this sort if thing with Santander or another lender before regards planning permission being in place? And if so what did you do?

Thanks to everyone and anyone who might be able to shed some light here.

Mortgage_Mark_2

Hi,

This isn't one I've encountered before but I can see the reason why they wouldn't like it, on face value, as if you had the intention of doing the works yourself, you've borrowed money from them secured against an asset worth several hundred thousand pounds, and then you're knocking it down, rendering it worthless.

Hypothetically, if you encountered financial difficulty between this stage and building the new houses, they would have no security for the loan. Extremely unlikely of course, and if you're not planning on doing the work then I understand why it's frustrating but lenders always look at the 'worst case scenario'.

Getting something drawn up legally to set aside the planning consent, if possible, could be the only solution.

borkid

Mortgage_Mark wrote: »

Hi,

This isn't one I've encountered before but I can see the reason why they wouldn't like it, on face value, as if you had the intention of doing the works yourself, you've borrowed money from them secured against an asset worth several hundred thousand pounds, and then you're knocking it down, rendering it worthless.

Hypothetically, if you encountered financial difficulty between this stage and building the new houses, they would have no security for the loan. Extremely unlikely of course, and if you're not planning on doing the work then I understand why it's frustrating but lenders always look at the 'worst case scenario'.

Getting something drawn up legally to set aside the planning consent, if possible, could be the only solution.

I think the OP means there is outline planning permission for building in the garden not knocking the house down. So 3 houses instead of 1.

maninthestreet

Building two other properties in the garden may well have a detrimental effect on the value of the existing property.

Planet9

Thanks Mark, appreciate the POV. As a member said below, the planning is for an additional two houses thus retaining the first so the house that is there now would remain if we actually wanted to build - which we don't.
Are clauses/caveats on mortgages common or unusual?

Mortgage_Mark_2

Planet9 wrote: »

Thanks Mark, appreciate the POV. As a member said below, the planning is for an additional two houses thus retaining the first so the house that is there now would remain if we actually wanted to build - which we don't.
Are clauses/caveats on mortgages common or unusual?

Ah I see, my mistake, sorry (and thanks to borkid for pointing out).

I can only imagine that they think you following through with the build would have a significant effect on the value of this property once complete, given the garden will obviously have reduced significantly in size, and their security would therefore be reduced, as the original title deed would be for, let's say Number 1, The Street (existing property), and by creating Number 1A and number 1B, The Street, you are devaluing Number 1, The Street (which will remain as their security).

gunge

We purchased a house in 2009 using a Santander mortgage, it had outline pp to demolish and replace with two new houses. It was never raised as an issue.

Brock_and_Roll

2009 was like a 100 years ago compared with today's rules & policies!

If I were the credit officer on this and found out about the PP, I would reject it. The decrease in the value of the mortgaged house may wipe out the equity and potentially expose the bank to losses.

Most importantly, surely the price being paid reflects the value of having the planning agreed for the garden builds? - this is surely likely to be considerably higher than the value of a similar property with possibility of garden grabbing PP.