One of the most exciting elements of property development is the prospect of converting a property into a block of flats.
The practice is becoming increasingly popular, especially in larger cities. And even more so when they have a high population of young professionals and students such as London, Oxford, Cambridge, and Bath. Splitting up a property can secure you a very profitable short-term income, as well as future capital gain if you decide to sell.
Are you planning to invest in a block of flats conversion? Then here’s what you need to consider before you start.
Before you start hunting for the perfect property, you need to find the right area. This will involve a lot of research on the current rental market and future re-development sites. For example, new Crossrail links will transform the transport infrastructure of London, and increase commutability to the Capital. The areas that this affects will appeal to renters, so these areas would be ideal for a block of flats conversion.
You’ll then need to apply for Planning Permission. As you are intending to change the use of the building and turn them into separate living units. You’ll need to apply for Building Regulations as well as Planning Permission.
This covers structural changes such as putting up walls, installing bathrooms, kitchens and central heating. It also covers separate services supplies (gas, electricity, water, drainage) and utility meters for each unit
You’ll need to contact your local authority to find out if your block of flats qualifies for a house of multiple occupation (HMO). If so, you’ll have to apply for an HMO license, which covers extra legal responsibilities for landlords. Read our article for more information on houses of multiple occupation.
A new building that has been purpose-built as a block of flats isn’t considered an HMO. However, a house converted into self-contained flats may be regarded as an HMO.
Be aware though that each local authority seems to set its own standards and regulations in regard to HMOs. Even if your block of flats isn’t considered an HMO by them, they may apply other licensing and regulations. It’s always best to check with your local authority to ensure you stay on the right side of the law.
HMO Licensing in your area?
Don’t hesitate to check with your local authority regarding your property. This is absolutely critical. You will find that there are many councils that have changed the way that they deal with things and have put in as what are known as Article 4 requirements. These are articles where the Council are entitled under legislation to add in additional requirements. For instance Brighton and Hove council under their Article 4 require certain areas within Brighton and Hove to have additional planning when you wish to convert the property into what is known as an HMO. If that particular street already has ten per cent as HMO s then you will not be entitled to planning and they will reject it. They will also ask for you to take out a licence for that property.
This licence could have a substantial amount of additional conditions such as electrical reports, regular inspecting of the property, up to date fire regulations which could be substantial and any other special conditions they wish to add. It is therefore important that when you are looking at converting a property into flats that you go with your eyes open and you understand what your legal responsibilities are. We have found in the past that some landlords have not understood what their responsibilities are and the penalties can now be so severe that some landlords have even gone to prison. This isn’t something that you should take lightly.
Are there new laws in respect of landlords?
There have been over the years in excess of 125 new laws for letting a property or converting them into flats. You need to understand that this is a minefield area and if you don’t have specialist knowledge then you should look into it. There are various examples for instance as MEs which deals with energy performance certificates and the minimum requirements that there are now for letting it out thereafter. You may also be required under the new law to have an EICR and/or PAT testing.
This basically ensures that you have to have the property legally correct for electrics. A test has to be carried out in respect of the property and this could lead to a substantial amount of additional work being required to bring the property up to date. A PAT test being a portable appliance test ensures that any appliances that you leave at the property are safe.
I am thinking of selling the flat do I still need building insurance?
Yes, you will often find that you will need building insurance even more in this instance as you will need to supply it to your solicitor. When you sell flats these are normally on a leasehold basis i.e. for a set term of years of anywhere from 99 years onwards and then you supply a copy of the building insurance that relates to that property to the solicitor. They will then pass this on to the purchaser.
You may find that the mortgage company of one of the purchasers will require some additional form of cover and we can deal with this for you. Make sure that you have the right type of cover for the right building and that your sales go through easily. You are no doubt aware that when you have sold all of the flats off in a building you will be left with the freehold. You may even sell shares of this to the purchasers that are buying the flat. However, you need to consider what you wish to do with the freehold once you have sold all of the flats off and who is going to manage it for you so that you have the correct insurance.
Once the conversion is complete, you’ll also need to consider what type of buildings insurance you’ll need. Insurers consider two or more flats in the same building as a ‘block’. Leaseholders or tenants will most probably have their own insurance in place. However it’s highly advisable to take out specialist Block of Flats insurance.
Block of flats insurance covers the entire block and offers more cover than regular building insurance. This can include fixtures & fittings, rent cover, rent guarantee and public and employer’s liability. Our article on Block of Flats insurance explains the differences in cover.
Why don’t you contact us and have a discussion about what your requirements might be. We have over 20 years’ experience in dealing with this type of cover for landlords. Look at our Google reviews constant five stars can’t be wrong!
We can even give you examples of where we have saved people thousands of pounds over the years.
Don’t hesitate to contact us. You won’t get a call centre that is automated but genuine people here to help you.
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