Purchase fell through as flat was above a cafe?

HWG

Hi all,
We had a purchase fall through last year - we've since happily bought a different property, but I though I'd see what MSE thought about the situation.

We were first time buyers and had an offer accepted on a nice flat in a new-ish (7 years old) building that had a cafe on the ground floor. To our surprise, our bank refused to lend on the property as it was above a commercial premises serving hot food (cheese toasties etc), which makes it too risky for most lenders.
As only a few niche lenders would consider this case, and it would seriously affect its resale values, we pulled out. It "sold" a few more times over the next six months and reappeared on the market, eventually selling at a substantial discount.

We had done plenty of research into buying a property, and this restriction simply hand't come up. I accept that I'm ultimately responsible for picking a property that is suitable for my financial circumstances. I do, however, think it was pretty poor form for the agent to let this situation arise.

The agents seemed to be as surprised as us. I'm not sure if they were unaware of the restriction (In which case it's a pretty basic failing from a major firm), or if they were just chancing it.

So, my first question is: Who was in the wrong? Did they drop the ball, or was I a naive first time buyer?

Second question - The building in question was originally constructed without the cafe part (it was just an open area), with the cafe added a few years ago.
I presume the pre-cafe flats were perfectly mortgagable, with the residents now suffering from a serious reduction in value of their flats. Out of interest, would they have any legal recourse? Who would it be against if so?

kingstreet

The agent is there to sell the property. It isn't their problem whether or not the property is mortgageable due to commercial premises downstairs.

Although as a FTB you are not expected to know of this issue, you can obtain professional advice quite cheaply to learn of it.

Before a cafe could be opened. planning permission for change of use would be required and notice would be sent to the neighbours to give them a chance to object.

3mph

I would certainly think twice about being above a caf!.

We were very interested in a new flat in a just completed block of 10 on the sea front. Seemed ideal except for views from bedrooms (of retaining wall 6ft away). Luckily I went there at 9pm on a Friday to see what parking was like (there was only one space allocated with the flat in the underground car park) and to see if any street lights shined into it to discover the Persian restaurant next door going full tilt and I realised that we could lie in bed knowing exactly what the dish of the day was. We never noticed it before since we had only looked in daytime when it was closed and hardly noticed there was even a restaurant.

A salutary reminder to check a place at different times and on different days.

HWG

Thanks kingstreet. That's consistent with my understanding.

I do agree that it wasn't the agent's responsibility to point this out, but it resulted in them knowingly facilitating an offer that was doomed to fail. Surely no-one wins here, and the right thing to do would have been to mention it to us or the seller?

Re: the planning permission - I'm really surprised that the residents would have let this happen, given that it seems to have knocked about 20% off the value of their flats. I wonder if they were caught unaware too...

csgohan4

Estate agents are not mortgage providers, they do not know all know the criteria for each lender


What ever the thoughts of the current residents, you need to move on

AFF8879

Where is the property located? Certainly in London, flats above commercial premises can be slightly tricky but I've never known mortgages be refused outright by every lender applied to - a few of my friends went down this route with no issues (could never do it myself, value my peace and quiet far too much!)

Outside of the big cities there is probably far less appetite from lenders given flats above commercial premises probably make up a negligible proportion of applications they receive. Plus you have to consider the classification of the business, e.g. A flat above a solicitors office is probably a lot less risky than one above a Chinese takeaway (though not as convenient at 2am on a Saturday hehe)

Hoploz

Personally I'm well aware of the issue.

I wonder whether the LTV makes a difference? It could be that some lenders are willing to lend up to a certain level but not beyond. For example, if someone needs a 90% mortgage then most wouldn't lend, but if someone only needs a mortgage of say, 50% then more lenders may consider it.

HWG

So we were 85% LTV and it was in London. And we're not talking a 24-hour kebab shop here, just a quiet little cafe.

I rang round a handful of banks the day we got the bad news, and they all confirmed that they wouldn't lend.
I was stunned, as it seemingly means that huge swathes of flats here are ineligible for mortgages from high street banks.

Owain_Moneysaver

HWG wrote: »

Re: the planning permission - I'm really surprised that the residents would have let this happen, given that it seems to have knocked about 20% off the value of their flats. I wonder if they were caught unaware too...

reduction in property value is not a valid planning consideration and would not have influenced the planner's decision to grant consent.

Rain_Shadow

HWG wrote: »

So we were 85% LTV and it was in London. And we're not talking a 24-hour kebab shop here, just a quiet little cafe.

I rang round a handful of banks the day we got the bad news, and they all confirmed that they wouldn't lend.
I was stunned, as it seemingly means that huge swathes of flats here are ineligible for mortgages from high street banks.

We are talking premises with permission to sell food. Just because that is currently a 'quiet cafe'..............

Owain_Moneysaver

Rain_Shadow wrote: »

We are talking premises with permission to sell food. Just because that is currently a 'quiet cafe'..............

Exactly. "Hot food takeaway" is the class of use, I think. Fire risk can also be significant.

Also a nice quiet bank (financial and professional services) is I think in the same class of use as a betting shop, and some of them can be very rough.