Buying Loft Space on Separate Lease – Barclays Mortgage + Council Freeholder – Advice/Experience

firsttimebuyer2024

Hi everyone,

I currently own a first-floor flat in a two storey mid terrace, purchased with a mortgage from Barclays. I'm considering buying the loft space above my flat, with a premium paid to the freeholder (a London council). However, the council will only sell the loft under a separate lease, not incorporate it into my existing flat lease.

A few things to note:

• The council will make me solely responsible for all future repairs to the roof above the loft through the service charge (there isn't any sinking fund. There are only my flat and the ground floor flat which is still owned by the Council. I dont and won't own the roof)
• I'm converting the loft into living space later (subject to permission, of course).
• I’ll need to inform Barclays, and possibly get their consent – not sure what they typically say about owning a second lease above the mortgaged property.

I have a few concerns and would really appreciate hearing from anyone with similar experiences or advice:

1. Has anyone successfully purchased a loft or similar space on a separate lease while having a mortgage with Barclays (or another lender)?
2. Did your lender agree, and were there any conditions or complications?
3. Any issues with resale, valuation, or insuring a property split and roof maintenance obligation like this?
4. Any tips on structuring this legally to avoid problems down the line?

Would be very grateful for any insights – especially if you've dealt with a council freeholder or Barclays in this kind of situation.

Thanks in advance!

Emmia

How sure are you that the council (once they've sold you the lease) will also let you convert the loft into habitable space? Have you looked at the building regulations and fire safety requirements of making this kind of conversion, and are they practical to do?  Is the space up there high enough to walk around in? Can you insulate to the right level? Would you be allowed to put velux windows or similar in?

I ask, as having a loft for storage accessed by a ladder will add some value, but converting it into habitable space will add a lot more - so you've presumably got some plans, an idea of cost, and have done the sums... which indicate this is a feasible thing to do, and that you'd definitely make the money you'll spend back if/when you sell. Do flats with an extra bedroom (or whatever you'd use the conversion for) in your area go for significantly more than you'd get without the works being done?

What you don't want is to buy the lease, and the council then refuses the permission, as the conversion can't be done in a way that meets fire safety and other standards... Or the price uplift doesn't cover the conversion and associated costs.

I'd also be cautious about being responsible for the roof repairs, as presumably the council (as the owner) would have to approve any contractor doing repairs or maintenance - or would specify particular (more expensive potentially) companies.

I'm sorry this answers none of your questions though.

eddddy

I assume you'd be making consent for conversion a condition of the purchase - i.e. you'd by 'buying' the loft from the council with consent to convert.

I suspect that a condition of the consent would be that you must get the correct planning consent, and building regs approval.

Maybe you want to get planning consent before purchasing, and get advice from a surveyor about achieving building regs compliance before purchasing - to make sure that your plans are viable.

(Although some 'less friendly' freeholders might increase the price of the loft, once they see you have planning consent. But maybe you trust the council not to do this, or maybe you want the council to sign some kind of 'conditional contract' or 'option agreement' before you apply for planning consent.)

firsttimebuyer2024 said:

• I’ll need to inform Barclays, and possibly get their consent – not sure what they typically say about owning a second lease above the mortgaged property.

One of their main concerns will be saleability, if you default on your mortgage, and they need to repossess.

If you do the conversion, then they have to repossess - as things stand, they would get roughly half a flat, containing a staircase up to a floor they wouldn't own. That would be difficult to sell at a reasonable price. The 'knocked-down' selling price might not cover the outstanding mortgage.

So as a minimum, I suspect they would want to add a charge on the new lease, so that they could repossess both leases together.

Also, maybe they would regard combining 2 leasehold properties as 'development'. And they probably wouldn't allow development of a property with a residential mortgage.

Do you need to increase your mortgage to buy the new lease and/or pay for the conversion work?

gwynlas

Whilst you might get n fine with current council tenant who knows who they might put there in the future?

You would be better off investing elsewhere.

firsttimebuyer2024

Emmia said:

How sure are you that the council (once they've sold you the lease) will also let you convert the loft into habitable space? Have you looked at the building regulations and fire safety requirements of making this kind of conversion, and are they practical to do?  Is the space up there high enough to walk around in? Can you insulate to the right level? Would you be allowed to put velux windows or similar in?

I ask, as having a loft for storage accessed by a ladder will add some value, but converting it into habitable space will add a lot more - so you've presumably got some plans, an idea of cost, and have done the sums... which indicate this is a feasible thing to do, and that you'd definitely make the money you'll spend back if/when you sell. Do flats with an extra bedroom (or whatever you'd use the conversion for) in your area go for significantly more than you'd get without the works being done?

What you don't want is to buy the lease, and the council then refuses the permission, as the conversion can't be done in a way that meets fire safety and other standards... Or the price uplift doesn't cover the conversion and associated costs.

I'd also be cautious about being responsible for the roof repairs, as presumably the council (as the owner) would have to approve any contractor doing repairs or maintenance - or would specify particular (more expensive potentially) companies.

I'm sorry this answers none of your questions though.

Thanks for the advice. Yes the premium is based on the plans drawn by the architect on the basis of the loft space being used as habitable room.  

firsttimebuyer2024

eddddy said:

I assume you'd be making consent for conversion a condition of the purchase - i.e. you'd by 'buying' the loft from the council with consent to convert.

I suspect that a condition of the consent would be that you must get the correct planning consent, and building regs approval.

Maybe you want to get planning consent before purchasing, and get advice from a surveyor about achieving building regs compliance before purchasing - to make sure that your plans are viable.

(Although some 'less friendly' freeholders might increase the price of the loft, once they see you have planning consent. But maybe you trust the council not to do this, or maybe you want the council to sign some kind of 'conditional contract' or 'option agreement' before you apply for planning consent.)

firsttimebuyer2024 said:

• I’ll need to inform Barclays, and possibly get their consent – not sure what they typically say about owning a second lease above the mortgaged property.

One of their main concerns will be saleability, if you default on your mortgage, and they need to repossess.

If you do the conversion, then they have to repossess - as things stand, they would get roughly half a flat, containing a staircase up to a floor they wouldn't own. That would be difficult to sell at a reasonable price. The 'knocked-down' selling price might not cover the outstanding mortgage.

So as a minimum, I suspect they would want to add a charge on the new lease, so that they could repossess both leases together.

Also, maybe they would regard combining 2 leasehold properties as 'development'. And they probably wouldn't allow development of a property with a residential mortgage.

Do you need to increase your mortgage to buy the new lease and/or pay for the conversion work?

Thanks for the advice. Yes that's right. I won't proceed without getting planning first (but not worried about it as there are plenty of precedents on the street).

Luckily I don't need to increase my mortgage to buy the new lease or renovation. All can be funded through savings. My plan is to remortgage it once the renovation is done - in theory it should increase the value of the property (as a whole including the loft) and give me a lower loan to value ratio and lower interest rate. 

But hopefully the split lease + roof maintenance obligation won't actually devalue the flat instead....

firsttimebuyer2024

gwynlas said:

Whilst you might get n fine with current council tenant who knows who they might put there in the future?

You would be better off investing elsewhere.

I did think about this too. But I need more than 1 bedroom for family and unfortunately it is probably the only way I can afford to live in the local area. 

Albermarle

Have you had any quotes for doing it ?
A loft conversion is quite a big job ( more so than a standard extension) .
I think in London a ball park figure would not be far off £100K.