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Fire Regulation Challenges for High Rise Buy to Let Flat SPV Mortgage Application

Fire Regulation Challenges for High Rise Buy to Let Flat SPV Mortgage Application

27.03.20 | Written by: Agata Rogozinska

The Clients: Two experienced buy to let landlords with three properties all owned under their personal names.

The Property: A two-bedroom, leasehold flat within a modern high-rise building, situated in a desirable suburb on the outskirts of a Northern city.

The Finance: Our clients were transferring the flat to their newly created SPV Limited Company. They required a Ltd Co buy to let mortgage to complete the purchase.

The Challenge: In the wake of the 2017 Grenfell Tower tragedy, the Government published ‘Advice Note 14’ (AN14), outlining recommendations for building owners with regards to fire precautions in buildings over 18 metres high.

As our client’s flat was in a seven-storey block, the chosen lender wanted a full fire report as part of their checks. Although there was a fire report for the building, it didn’t have the specific wording needed to satisfy the lender that the building met all AN14 recommendations, meaning that they wouldn’t proceed. Our clients had an External Wall Fire Survey (EWS1) completed; however, the lender would not accept this either on the same basis.

To complete a new full fire report was expensive and neither the building’s management company nor our clients were willing to pay for one, especially as it wasn’t legally required. This put a complete stop to the whole application process, and due to many lenders using AN14 as a base for their criteria on these buildings, it was difficult to find an alternative and suitable mortgage for our clients.

The Solution: Our clients were not the only flat owners finding it almost impossible to mortgage their high-rise property. While not legally binding, many lenders used Advice Note 14 for their criteria which meant that many fire reports were no longer deemed satisfactory.

Fortunately, in December 2019, AN14 was modified. This change allowed us to re-submit the EWS1 to the lender, who now accepted it. As we were able to have these discussions with the lender directly, it saved the client a lot of time and hassle. Ultimately, we were able to secure the buy to let mortgage they wanted and successfully purchase the flat into their SPV Limited Company. Here are the details:

Property value: £195,000

Loan amount: £142,500

LTV: 73%

Rate: 3.59% 5-year fixed

Term: 20-years, interest-only

Mortgage payment:  £859 per calendar month

Lender arrangement fee: None.

Rental income: £900 per calendar month

Application: SPV Ltd Company

Consultant: Agata Rogozinska, 01732 471602

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

NB: ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE

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