Buying a Converted Property

Converting unused buildings into much-needed housing has been growing in popularity, with more than 121,000 flats created in England since 2013, under permitted development rights.

They offer affordable housing in the hearts of our urban areas, but they may compromise on light, space, privacy, traffic, and walkable amenities.

What is a converted property?

A converted property is a building that has been altered from its original purpose into one or more residential dwellings. For example, commercial buildings such as office blocks and shops, industrial buildings such as factories, and agricultural buildings such as barns.

Whether or not you are relying on a mortgage to purchase a converted home, you should consider these common reasons that a mortgage may be refused, and weigh this carefully into your decision to buy.

Why would my mortgage be refused on converted property?

Non-standard construction

Commercial and industrial buildings often use non-standard construction, such as concrete or steel. Many lenders will refuse to mortgage non-standard homes as they are higher-risk and harder to insure.

Flats above commercial premises

Lenders may be reluctant to mortgage flats or maisonettes above commercial property, such as shops or restaurants, due to the greater risk of fire and break-ins due to shared access rights.

Brownfield sites

Brownfield sites may have issues with contaminated land from industrial use. Your conveyancing solicitor can conduct a search to see if there have been contaminated land issues nearby, and if the land has since been decontaminated.

Character homes

Converted character buildings such as churches, lighthouses, fire stations and others may need a mortgage from a specialist lender, due to unique challenges specific to the building.

Size under 37 square metres

If the conversion were completed under permitted development rights, it would not have been subject to the government's minimum space standard, requiring residential dwellings to be no smaller than 37 square metres. Some mortgage lenders will not lend on dwellings under 37 square metres, while others will have a lower acceptable minimum of 30 square metres.

External condition

Tall buildings such as ex-office blocks may have unsafe external cladding. If so, lenders will often refuse to lend unless the lease qualifies for leaseholder protections with an accompanying deed of certificate; or is otherwise exempt because it has an EWS1 with classification A or B1; or the developer has committed to remedy the issue themselves.

Leaseholder restrictions (if applicable)

As with any Leasehold, the lender will likely refuse to lend if the remaining term on the lease is too short, the service charges are too high, or there are other unreasonable restrictions on the title.

Repair bills on older constructions

The lender may refuse on affordability grounds if unreasonably high repair costs are anticipated, for example, where a factory building has been converted into leasehold flats, which bear responsibility for maintaining its listed industrial chimney. This may also be the case in some period conversion flats, if, for example, a huge listed roof needs to be replaced, imminently.

Planning permission

Lenders may refuse to lend on conversions that breach planning permission, as, in the worst case, the local authority could force the current owner to return the property to its original state. In most cases, however, they will consent to lend if you can get sufficient indemnity insurance. Unless the local authority is already aware of the works or breach.

In 2013, the government added office-to-residential conversions to permitted development rights, meaning developers only had to seek 'prior approval' as opposed to full planning permission. This resulted in some tiny flats, some even without natural daylight.

In 2020, the government introduced a new law requiring all office-to-residential conversions to receive daylight

Since 2021, all new permitted development right conversions have to meet the Nationally Described Space Standard (NDSS) of 37 square metres minimum.

In 2025, we may see the introduction of a law promised in 2023, making the conversion of a single dwelling into two flats a permitted development right.

Building regulations

Lenders will refuse to lend against a property that breaches building regulations, as it may be unsafe. In some cases, they will be satisfied with indemnity insurance to protect against the cost of enforcement action.

Should I buy a converted property?

There are many desirable converted properties to choose from, as long as you place your offer carefully. As always, we advise due care and diligence; choose a good conveyancing solicitor, get a RICS home survey to flag any defects, and inspect the property thoroughly to ensure it will suit you.

To get a mortgage where a high-street lender has refused, you may need to consult with our 100% impartial mortgage broker, who will present your best options. If very limited lenders or products are available for the property, it may be best to pull out, as you could end up in a corner when you come to remortgage or sell up.

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