Mortgage rejected due commercial use of property

petelamb93_

” Valuer has confirmed the property does not meet our criteria due to commercial use. It is self catering accommodation with no council tax band and has non domestic rateable value.”

Hi - we are purchasing a house in the Scottish Borders that is currently self catering accommodation. Our mortgage lender won’t proceed as their valuation has stated it is a commercial use property with no council tax 

We cannot change the use to residential until sale completion.

And we cannot complete without mortgage funds that require a residential valuation.

the house was residential until 2009 and had an old council tax band. 

Is there any advice on this situation? We feel completely stuck. Can we ask for the lender to do another valuation on a residential basis? 

The Scottish Borders council have confirmed the current owners will need to inform them of a change of use if they are to rate it for council tax. 

thanks
pete (MSE newbie!) 

user1977

petelamb93_ said:

We cannot change the use to residential until sale completion.

Says who? You could apply for planning before completion. Have you not discussed with your solicitor?

Herzlos

Surely you'd need to own the property before submitting any applications.

Will your mortgage company accept an in-progress application for change of use if you could get the seller to apply?

Can you find a different mortgage company? A broker may be able to help.

RAS

You don't need to own a property to put in a planning application. But it might take some time and assumes the seller is prepared to wait.

I'd suggest paying for a pre-application meeting to discuss with the planners might be worth it, assuming they offer it in that authority?

user1977

Herzlos said:

Surely you'd need to own the property before submitting any applications.

No, that's not how it works. You don't think developers buy land and then cross their fingers that they'll get planning?

eddddy

Herzlos said:

Surely you'd need to own the property before submitting any applications.

As others have said, you don't need to own a property to make a planning application.

But the risk would be that the OP applies for planning permission (and pays the fees etc), then when planning permission is granted, the seller sells to somebody else for more money.

There are legal agreements that the OP and the seller could sign to prevent this (options, exclusively agreements, conditional contracts, etc), but that adds complexity and cost.

Herzlos said:

Will your mortgage company accept an in-progress application for change of use if you could get the seller to apply?

Can you find a different mortgage company? A broker may be able to help.

A mortgage lender is extremely unlikely to accept an in-progress application - because the application could be rejected or withdrawn.

I don't think the OP would find anyone offering a residential mortgage on a commercial property. But the OP could buy with a bridging loan, and then take out a mortgage after planning consent is granted.

But that would be expensive, and it could be fairly catastrophic if consent isn't granted for some reason.

petelamb93_

eddddy said:

Herzlos said:

Surely you'd need to own the property before submitting any applications.

As others have said, you don't need to own a property to make a planning application.

But the risk would be that the OP applies for planning permission (and pays the fees etc), then when planning permission is granted, the seller sells to somebody else for more money.

There are legal agreements that the OP and the seller could sign to prevent this (options, exclusively agreements, conditional contracts, etc), but that adds complexity and cost.

Herzlos said:

Will your mortgage company accept an in-progress application for change of use if you could get the seller to apply?

Can you find a different mortgage company? A broker may be able to help.

A mortgage lender is extremely unlikely to accept an in-progress application - because the application could be rejected or withdrawn.

I don't think the OP would find anyone offering a residential mortgage on a commercial property. But the OP could buy with a bridging loan, and then take out a mortgage after planning consent is granted.

But that would be expensive, and it could be fairly catastrophic if consent isn't granted for some reason.

Thanks all for you comments. Useful info. 

For additional context we understand the property was never changed to a holiday let via planning and is still listed as a dwelling on the council planning site - we understand we do not need planning permission to revert to residential. 

Issue is we can get it on the council tax roll until we complete and the lender won’t value it on a residential basis unless it is on the council tax roll. 

Our solicitor is investigation and aiming to provide some confirmation of our intended use.

the mortgage broker has been no help and has not seen this situation before .

equally the lender has not said whether they’ve encountered this before (which I find hard to believe!) 

thanks all!

HelloKitty1234

Hi @petelamb93_ ! I just wanted to double check what the outcome of this was? I believe I’m in a similar situation and have my mortgage application declined due to the property I’m buying being used as an Airbnb? Wondering if you had any luck or if you had to start from square one and find another property. Thank you!

anselld

The switch from NDR to Council Tax is not a planning matter if the current use is FHL, it is done by the VOA (in England anyway, not sure Scottish equivalent).  It is not a matter of permission, the VOA just need to be informed of the facts as and when they change, then they will do the Council Tax listing.  Problem is it takes them about 6-9 months.
So it would seem necessary to try another lender who may not be so picky or a lender based on the current use and then change later.