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columbo
25-12-2011, 13:04 PM
hi people, hope your all having a great christmas day,
this is my 1st post and can i just say whot a great forum this is . right sorry to start with this ,
im in the middle of buying a house which was converted to 2 , 2 bedroom flats with a 1 bed appartment on the side. Its a great house, great location for student rents,and earns very good incomes. I was told by the estate agents that all council permissions were in place and i would be given all the paper work, but my legal people now say it hasnt and has been operating like this for quite a few years with no problems. ? .So befor i sign anything will this cause me many problems ? also we are buying it outright as it was advertised for cash buyers only.
We plan on keeping this house for a long investment, im thinking the problems will/ may occure when we do come to sell the property.
We are exchanging contracts in a few weeks,
many thanks for any help , i no some of this would have been covered before ,
all the best for 2012.

jta
25-12-2011, 14:23 PM
I think a question I would want answered is whether the property could be mortgaged, and if not , why not? There are some buildings that mortgage companies just wont lend on because of some perceived problem with them. Then I would want to know if the conversions have been carried out with permissions.

columbo
25-12-2011, 14:59 PM
many thanks jta, will look into the morgage problems you have statted here. i was told its harder to get a morgage on FREE HOLD FLATS than lease hold. not sure if this is true or not .
the owner seems to want this sale quickly as he has other projects ? .he has a large amount of rented property i have been told so proberly nows alot about the renting game. i also have a flat, which i have rented with no problems so feel the property renting bussines could be my new work .
thanks again,

jta
25-12-2011, 15:24 PM
So far as I'm concerned freehold is a lot better than leasehold, if you are buying the whole building I do not see a problem with it. It is you that will be granting the 'short' leases to the tenants after that (AST's)

Snorkerz
25-12-2011, 15:43 PM
When was the conversion carried out? Did it comply with building regs? You run the chance of being classed as a HMO and having to have the place licensed. A licensable HMO with no license could not only be expensive to put right (or V expensive if not fixed, caught and fined) but a knowledgeable tenant could engineer the situation to get a refund of up to 12 months rent.

If this property has such good rents and potential, why did he current owner decide to ditch this particular block from his portfolio to risk on a new (presumably riskier) venture.

westminster
25-12-2011, 16:02 PM
I was told by the estate agents that all council permissions were in place and i would be given all the paper work, but my legal people now say it hasnt and has been operating like this for quite a few years with no problems.
What are the permissions which should be but aren't in place? Planning permission for the conversion from house to flats? Building control compliance? Are there separate title registers for the three [leasehold] flats?

And what do you mean by 'operating like this'?

I don't know why it would need an HMO licence to rent three separate 1 or 2 bed flats unless the house is still legally one unit.

Snorkerz
25-12-2011, 16:37 PM
I don't know why it would need an HMO licence to rent three separate 1 or 2 bed flats unless the house is still legally one unit.Fortunately, I do :)

Section 257 - Housing Act 2004
(http://www.legislation.gov.uk/ukpga/2004/34/section/257)

mariner
25-12-2011, 17:39 PM
The problems, if any, will arise well before you re-sell. There are many tales of woe re poor sound insulation in conversions, single utility meters and/or stopcocks etc for all occupiers.
Is this your first foray into the LL business? There's a lot more to it than how much rent you can take.
Why does seller really want to sell? Why only cash only buyers?
Start with a trip to your local planning office.

columbo
25-12-2011, 19:46 PM
What are the permissions which should be but aren't in place? Planning permission for the conversion from house to flats? Building control compliance? Are there separate title registers for the three [leasehold] flats?

And what do you mean by 'operating like this'?

I don't know why it would need an HMO licence to rent three separate 1 or 2 bed flats unless the house is still legally one unit.
thanks for the reply, well its still "one unit " we think, he has said he will put in place an insurance about the convertion work ( proberly some 15 years i think ?)
so thats whot i ment by " operating like this "
ho and all the flats are being rented at this time.

Faisel Balti
25-12-2011, 23:08 PM
columbo,
you mention 15 years of use as 3 separate dwellings. Are you aware of how many utility accounts exist for the three? Gas and/or electricity.
If you would like some advise on this you're welcome to email me at faisel_balti@hotmail.co.uk
I've had experience of exactly this kind of situation and would be happy to help. It sounds on the face of it a good opportunity
FB

mariner
26-12-2011, 00:49 AM
Faisel, It would be helpful if your PM dialog was conducted in open forum for the education of others. Neither you nor OP appear to have sufficient posts for forum PMs
Obviously open forum posts should not disclose identifiable details.

Sad S
26-12-2011, 09:07 AM
These sort of HMOs are customarily valued at far lower multiples of rent passing than conventional letting investments. Very rough rule of thumb you wouldn't want to pay more than six times the gross annual rental income.

That very much depends on where the property is, and its condition. In some cases it's possible to get considerably more.

A "Certificate of Lawful Existing Use" is worth having - OP's solicitor should demand the vendor obtain one before they even think of exchanging contracts. It legitimises the existing use in planning terms.

Faisel Balti
26-12-2011, 09:57 AM
A "Certificate of Lawful Existing Use" is worth having - OP's solicitor should demand the vendor obtain one before they even think of exchanging contracts. It legitimises the existing use in planning terms.

I would be inclined to disagree with pressuring the vendor to obtain a Certificate of Lawfulness' - they would then want far more for the property. Sometimes developers will sell-on a potential development if it doesn't fit in with their usual operations - and the OP shouldn't be too concerned that in this case he's being sold a pup. A couple of times I've bought 'hand-me-downs' for them to turn out very profitable.
I asked the OP to contact by email, and I take mariners point, but firstly didn't want to bore readers silly with my experiences but also the council in my area has designated areas where there are to be no conversions - maybe I'm tending towards paranoia but it's not in my interest to have hoards of people all carrying out similar developments such as I've been doing - and I'm sure plenty of others. I like to help though but don't want to kill the golden goose.
FB

columbo
26-12-2011, 12:13 PM
again many thanks for all you help and advice, i just new this was a great forum. Faisel Balti, i may just email you , as my legal people are a bit lost on this type of property they told me they havent seen this before ?
enjoy the holidays good people.

Lawcruncher
26-12-2011, 14:03 PM
...my legal people are a bit lost on this type of property...

Sorry, but they should not be. Ask them what they are doing accepting instructions in a matter where they lack the relevant expertise. You need to be properly advised. Only a competent professional with all the relevant facts and paperwork can advise.