Buying a illegally subdivided house, risks?

flat_white_

hi guys, thought this forum might be the right place to quickly check this...
I recently come across a very run-down house that's within my budget for me to buy as a live-in.  I am happy to put up with the renovation time and front the cost, but just want to see there are no obvious landmines I am walking into... The house is company-owned and currently subdivided to 4 rental flats (all with their own kitchens).  Wonder if there are any obvious things I need to look out for? things I can think of:

1. I don't think the current subdivision is legal as the house is still showing as one title on the land register. Would I inherent any legal risks?
2. I read that banks do not lend residential mortgages to house with multiple kitchens, as they see it as a sign of potential subletting risks. Is it true? 
3. All the flats are tenanted at the moment, so the vacant possession risk is a little larger..,
4. Wonder if there is any mortgage issue in buying a very run-down house off a company...

Thank you!

FreeBear

flat_white_ said: 1. I don't think the current subdivision is legal as the house is still showing as one title on the land register. Would I inherent any legal risks?

Check your local council's web site - Most (all?) councils maintain a database where you can see what band a property is in for council tax purposes. Starting point would be here - https://www.gov.uk/council-tax-bands

If you are expecting vacant possession on exchange (which a mortgage company would require), you may well have a long wait whilst the current tenants are evicted. And if it is a belligerent/acrimonious eviction, expect to find the place trashed afterwards.

SavingPennies_2

Personally I would walk away, sounds more hassle than it's worth. One tenant in situ is enough of a risk, but 4 different tenants?! Given the run down state and dubious subdivision of the house we can assume some / all of the tenants are financially vulnerable and may not be in the best place to want/ be able to move out when you want to move in.

AdrianC

flat_white_ said:

I recently come across a very run-down house that's within my budget for me to buy as a live-in.  I am happy to put up with the renovation time and front the cost, but just want to see there are no obvious landmines I am walking into... The house is company-owned and currently subdivided to 4 rental flats (all with their own kitchens).

Wonder if there are any obvious things I need to look out for? things I can think of:

1. I don't think the current subdivision is legal as the house is still showing as one title on the land register. Would I inherent any legal risks?

No.

The worst that could happen is that you get forced to either apply for retrospective planning permission to subdivide the house... or remove the subdivisions and return the house to being a single dwelling. Which is exactly what you'd be doing anyway...

2. I read that banks do not lend residential mortgages to house with multiple kitchens, as they see it as a sign of potential subletting risks. Is it true?

Yes, it may very well be.

But if you can assure them that you're returning the house to single-occupant status, it may not be an issue.
You may have to deal with a short-term retention until such time as you can demonstrate the house is back to being a house.
Or you may only be able to find a relatively expensive loan, which you can then later remortgage.

3. All the flats are tenanted at the moment, so the vacant possession risk is a little larger..,

It's rather mahoosive.

One tenant might kick up funny and wait until a court grants possession.
A run-down property increases the risk of that, because there's a strong chance they might want to get social housing.
Four separate tenants...? It's a very strong likelihood at least one will try it. And maybe they'll convince the others to try, too.

If one holds out, what's going to happen to the condition of the property in the mean time?

It depends how big a hurry you're in. There's no chain in either direction, of course.

OTOH, maybe a corporate vendor will take a pragmatic route and pay them off rather than delay the sale, where an individual might get on their high horse at the very thought.

4. Wonder if there is any mortgage issue in buying a very run-down house off a company...

No, the vendor doesn't matter to your lender.

Only the risk that your lender will be exposed to post-purchase.

They only care about how good the house is as security in case you don't repay the mortgage and they have to repossess, and how sellable it'll be post-repo.

user1977

flat_white_ said:

1. I don't think the current subdivision is legal as the house is still showing as one title on the land register. Would I inherent any legal risks?

No, the title isn't a problem in the slightest. There's no need for each flat to have a separate title - perfectly normal for say a landlord to own a (legally-divided) block of flats on one title - or say a whole council housing estate to be on one title. And it simplifies matters for you as you won't have to undo any division within the title.

Your main problem is that you're not buying something which is already a house, so you can't fund it with a normal residential mortgage. You'll need some sort of development funding, which is going to be more expensive and restrictive.

flat_white_

FreeBear said:

flat_white_ said: 1. I don't think the current subdivision is legal as the house is still showing as one title on the land register. Would I inherent any legal risks?

Check your local council's web site - Most (all?) councils maintain a database where you can see what band a property is in for council tax purposes. Starting point would be here - https://www.gov.uk/council-tax-bands

Thanks guys, seem to be in line with what I was worried about. 

I can see the flats being individually listed on the council tax search sites. Not sure if this means the subdivision, most likely done ages ago, was legal? if so, not sure if it still counts as an amalgamation of flats given all of them were just rentals. sounds messy!

user1977

flat_white_ said:

FreeBear said:

flat_white_ said: 1. I don't think the current subdivision is legal as the house is still showing as one title on the land register. Would I inherent any legal risks?

Check your local council's web site - Most (all?) councils maintain a database where you can see what band a property is in for council tax purposes. Starting point would be here - https://www.gov.uk/council-tax-bands

I can see the flats being individually listed on the council tax search sites. Not sure if this means the subdivision, most likely done ages ago, was legal? if so, not sure if it still counts as an amalgamation of flats given all of them were just rentals. sounds messy!

It's not conclusive, but it certainly suggests they haven't been hiding anything from the council. Have you checked the planning history? Though might not give you the answer if the subdivision was done decades ago.

flat_white_

user1977 said:

 Have you checked the planning history? Though might not give you the answer if the subdivision was done decades ago.

yeah, the planning search yielded nothing, nor did the house have any transaction records post-1995. Guess if it is really a number of properly divided flats, a standard residential mortgage will be a big issue?  also suppose if the division was done properly I will be up against developers who want to take it as a project.

rachel230

There is lots of potential for ongoing stress buying a property with this set up - presumably price reflects this..
However the costs involved in four possibly difficult and long drawn out evictions may outweigh any bargain cost of property.
As PP said would be better (understatement) to buy with vacant possession but current owner may prefer to pass this possible nightmare situation on to a new owner. 
Could be a long, expensive process going forward - both in financial and mental stress terms. Is the property cheap enough to make it worthwhile..

AdrianC

flat_white_ said:

Guess if it is really a number of properly divided flats, a standard residential mortgage will be a big issue?

I'm not sure the status of the flats makes a big issue.

You're buying the freehold of the building. There are no individual leases for the four flats.

also suppose if the division was done properly I will be up against developers who want to take it as a project.

Again, I'm not sure that makes a huge difference.

If a developer thought there was profit in it, it'd have sold by now...

user1977

flat_white_ said:

user1977 said:

 Have you checked the planning history? Though might not give you the answer if the subdivision was done decades ago.

yeah, the planning search yielded nothing, nor did the house have any transaction records post-1995. Guess if it is really a number of properly divided flats, a standard residential mortgage will be a big issue?  also suppose if the division was done properly I will be up against developers who want to take it as a project.

It doesn't really matter whether it's been divided properly or improperly - it's currently a block of flats, not a habitable (single) house, so doesn't fit the usual criteria for residential mortgages. If you want a standard mortgage, you'd first need to do the work to make it back into a single property, so you'd need a different way to fund the purchase (and works).