Apartment converted from offices - anything to be aware of?

Emily_Joy

I am considering a two bedroom apartment that is in an office conversion. It is located in South East, about 45 minutes from London. The conversion has been completed in 2016. It is being sold by "modern auction". The estate agent said that it has already been sold 3 times since May 2022 but all sails fall through because potential buyers were not able to get a mortgage. It has been significantly reduced in price. It is leasehold.  I will need a mortgage, too, and I have considerable deposit. I am not a first time buyer. I just got a new job which is some 2.5 hours by train from where my partner and I currently live. We cannot relocate because of my partner's job. An alternative would have been to rent something Monday-Friday, but I am not sure how practical it is, as rent payment for a one bedroom flat are about the same as mortgage payments for the 2 bedroom apartment.

I have no experience of apartments and leasehold properties in general. Anything I need to check in advance?

RAS

Start by avoiding modern auctions like the plague, and agents who run them.

You pay £x000 for permission to try and buy the property.
The purchase falls through. You lose your money and the seller and EA are quids in.

The fact that previous sales have fallen through because of difficulties getting a mortgage may also indicate bigger problems.

eddddy

Read the "modern auction" buyer's terms and conditions.

Typically, at the auction you are bidding to buy a "reservation" (The reservation period often lasts around 8 weeks.)

• The "reservation fee" is usually a minimum of £6k  - and is probably non-refundable, if you can't get a mortgage.

• The £6k+ reservation fee is on top of whatever you bid

• The £6k+ won't be treated as part of the purchase price for mortgage LTV purposes. i.e. You need £6k+ in cash, in addition to your mortgage deposit

If you're really interested in this property, in your position I would write an email to the auctioneer saying something like:

"I am offering £x for the property, subject to contract, however I am not prepared to pay any buyer's fees in relation to this property - particularly because I understand there have been problems obtaining a mortgage for this property previously. I will require a mortgage to buy this property."


The auctioneer will almost certainly try to kick up a fuss and try to suggest that you can't do this. But if there is no other interest in the property, the seller might accept your terms.




Edit to add...

But also do all the investigations you would normally do before offering on a property, for example...

• Find out why 3 mortgage applications failed
• Check lease terms - like years left on lease, ground rent, service charges

Norman_Castle

Unless you have a solution to its unmortgagabilty you are likely to have problems selling it.

elsien

 Would it be cheaper to be a Mon-Fri lodger than renting out a flat? 

eddddy

Norman_Castle said:

Unless you have a solution to its unmortgagabilty you are likely to have problems selling it.

The OP says they need a mortgage, but anyway...


Unmortgageable flats typically sell for less than mortgageable flats.

So in simple terms...

• You buy an unmortgageable flat at it's market value (i.e. cheaper than a mortgageable flat)

• You have to sell an unmortgageable flat at it's market value (i.e. cheaper than a mortgageable flat)

You might make the same %age gain (or loss) on your investment with an unmortgageable flat as with a mortgageable flat - or you might not. You have to make your investment decision. 


Obviously, if you buy an unmortgageable flat and do something to make it mortgageable - you might make an extra profit.

Annisele

Norman_Castle said:

Unless you have a solution to its unmortgagabilty you are likely to have problems selling it.

It sounds like unless OP has a solution to its unmortgagability they're likely to have problems buying it.

This sounds to me like something to stay far away from. But if the OP does all their due diligence and still loves the property, would the mortgage have to be on the new place? I'm wondering if they could raise funds against their existing property instead, allowing them to be a cash buyer for the new flat.

On a related issue, I don't think I'd just look at the monthly costs of "mon to fri rental" vs "mortgage". The buying costs are going to be non-zero, and there might be a stamp duty surcharge. If OP's main home is elsewhere, there might be capital gains tax on selling. If OP is sure they'll want to use the flat for five to ten years, it might be worth buying - but if I had a new job (that I might hate) and I couldn't relocate my whole life, I'd rent for a good while.

RedFraggle

What are the room sizes like? Not too long ago office to residential conversions were exempt from minimum size and that can cause mortgage issues. 
https://hoa.org.uk/2022/04/permitted-development-rights-office-to-residential/

diystarter7

Hi OP

Often if above retail outlets, slightly more diff to get mortgages
Then in London/se england at times, a lot of times in certain boroughs, blocks like this that are converted often have lower floors as HA property/rentals, and some people avoid these for some reason I guess

Then there are the certificate that may be not approved EG NHBC (we looked at a flat in london years ago cash buyers becuse no hnhbc cert converted three yrs before) may have not had the final sign-offs of something like that hence the difficulty of getting a mortgage possibly, dont know

Then at times complex leases possibly two, one for the apartments and another for car parking

Then there are the service charges, depending on the number of lifts, concierge, cleaning, heating - could be massive or will be massive so check if any works due, cladding problems etc etc

Personally, I 'd avoid unless I knew where I stood 100% it was a nice area, nothing outstanding re works and or prosed that may cost the owner a lot of money, service charge history and potential, the floor it was one and investigate fully why sold so many times

Do your full research and IMO, you will avoid but good luck either way

Thanks

mi-key

Did they say why people had problems getting a mortgage on it? was it because of the property, or just that those people struggled to get a mortgage in general? 

GDB2222

An unmortgageable property can only be bought by an all-cash buyer. Not many of these around, so this sort of property tends to go for a really substantial discount - say 30% less than the equivalent mortgageable property. 

That obviously makes it look really attractive, until you find you are wasting your time, as you can’t get a mortgage. Worse still, with the wretched modern auction system, you are paying a large auction fee before you then find out that you cannot get a mortgage. Don’t be fooled.