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Ashley Ilsen

What insurance do you need when developing a property?

By Blog, Development Finance

It is highly recommended that you have unoccupied buildings insurance in place, and you may also be required to take out a JCT contract (non-negligence insurance) as well as a contractor all-risk policy if developing a property.

As property development finance experts, we will explain these insurance products in further detail in the rest of this guide, to provide you with in-depth information so you can make an informed decision.

Unoccupied buildings insurance

If developing a property that is completely unoccupied, you will need unoccupied buildings insurance. Typically, there will be three levels of cover to choose from. Pick carefully the level of cover to ensure you are fully insured in the event something goes wrong.

  • Level one: this level of cover for unoccupied buildings insurance means that it will only pay out for FLEEA. This stands for Fire, Lightning, Earthquake, Explosion and Aircraft damage only. That means if the property development experiences flood or malicious damage, you will not be able to recuperate costs.
  • Level two: an insurer will cover you for theft, malicious damage, water damage with this insurance policy.
  • Level three: the highest level of unoccupied buildings insurance cover will provide full peril cover should something go wrong during property development.

Make sure you inform your insurer about renovations

When insuring an unoccupied property, inform the insurer when applying that you will be renovating the building. Some insurers will not necessarily make a pay out for major refurbishments if a claim was made or they may decide to implement a cover cap on renovations they would pay out for.

Contractors all risk insurance

If you are the property developer you should also take out contractors all-risk insurance, in order to make sure you are protected against other contractors also working for you.

The main reason for doing this is because you may not necessarily receive adequate cover from the contractors’ insurance policies. In the worst-case scenario, that means you would end up having to pay out for damage caused, out of your own pocket.

By not having this insurance policy in place, you could be putting your property investment at risk.

 

JCT Insurance  21. 2.1

Also known as Non-Negligence Insurance, it is in place in order to protect the employer (this being the property developer).

This type of insurance will protect the employer against any unforeseen damage to third-party properties, which have resulted due to property development works on your site by a contractor or sub-contractor.

The damage this insurance policy refers to includes things such as lowering of groundwater, vibration, heave or subsidence.

Keep in mind that if you don’t have this insurance policy in place, you could end up having to cover the cost of a claim.

 

 

 

 

 

planning-permission-drawing

What Doesn’t Need Planning Permission?

By Blog, Development Finance

Lofts extensions, garage conversions and installing roof lights are just some of the things that do not require planning permission. Instead, as with a number of other home renovations, it falls under the Permitted Development category. If something is in this category, it will mean you do not require planning permission from your local planning authority and can get it added pretty quickly, rather than going through the normal loops and hurdles with getting planning from your local council.

Magnet Capital are experts in property development finance and we go into further detail to discuss what work does not require planning permission.

  • Garage conversions
  • Loft conversions
  • Roof lights
  • Solar panels
  • Building a swimming pool
  • Adding a porch
  • Conservatories
  • Single-story extension

However, keep in mind that some Permitted Development restrictions can apply. For example, if the building you intend to renovate is:

  • In a conservation area
  • A listed building
  • You have already carried out a lot of work on this property

If you think any of the aforementioned may be applicable, check with the local authority first.

 

Why do some things not require planning permission?

The nature of planning permission is for the council and area to protect any of your neighbours from any building work or extensions that you do. Things like personal space, natural light and area preservation are key things for the council to consider whenever you want to add or make changes to your house.

The reason that a lot of things below do not need planning are because they are already within the structure of your house or garden – and do not impact your neighbours or your area.

 

Garage conversions

If you are simply intending to convert a garden into a living space then no planning permission is required. You will need planning permission it though if it is a standalone garage, which will require consent under Building Regulations.

 

Loft conversions

Not all loft conversions require planning permission. It all depends on the cubic content. You will usually not need planning if it is under 40cm cubed. However, to add a large loft conversion and extra bedrooms, bathrooms or an office space, will require planning.

 

loft-conversion

Some lofts may not require planning permission – always seek advice from a professional

Roof lights

No planning permission is needed if you want to make changes to the roof through adding lights. Providing that these do not project any further than 15cm from the roof slope, it is acceptable.

 

Solar panels

Solar panels also fall under the permitted development category in the majority of cases. This is providing that the panels do not protrude any more than 200mm beyond the plane of the wall or roof and it is no higher than the tallest part of the roof.

 

Building a swimming pool

It is also possible for swimming pools to be considered a permitted development too. However, there are some restrictions. The area the pool covers should be no more than half of the total garden curtilage.

 

Adding a porch

You do not necessarily need planning permission to add a porch either. It will need to meet the following criteria to avoid permission from the local planning authority:

  • The porch is no taller than 3m
  • It is not 2m within a boundary that is adjacent to a highway
  • Ground area does not exceed 3m

 

Conservatories

You will not need to apply for planning permission from the council if you are deciding to add a conservatory either up to 10 feet long.

 

conservatory

Depending on size, a conservatory may not require any planning permission from the council.

Single-story extension

A single-story extension can be classified as a permitted development if:

  • Similar materials to the original have been used
  • It does not sit forward of the principal elevation
  • If a rear extension on a detached house, it does not exceed a 4m depth
  • If an extension on a semi-detached or terrace, it can not exceed 3m in depth

See also, what work requires planning permission.

asbestos

What is asbestos?

By Blog

Asbestos is a toxic material that is often found in buildings and homes – and it is something that can be fatal if you come into contact with it. Asbestos may consist of the six fibrous materials listed below, as they are all naturally occurring in it.  This includes:

  • Amosite
  • Actinolite
  • Chrysotile
  • Tremolite
  • Crocidolite
  • Anthophyllite

The most common types of asbestos are amosite and chrysotile.

As a development finance company, asbestos is a problem that can arise for many clients and in this guide, we explain in further detail what you need to be aware of.

Why Was Asbestos Popular for Construction Purposes?

Prior to the discovery of its toxicity, asbestos was commonly used in construction and on industrial premises as it is highly fire-resistant and durable. We then saw asbestos used across the globe for many everyday homes, building sites, offices and more.

 

What Was Asbestos Used for?

Given the hardwearing and durable nature of asbestos, it was commonly used as a material for things such as:

  • To tile floors
  • As a ceiling material
  • Roofing shingles
  • Put in cement compounds
  • Used in textile products
  • Vehicle parts

Although asbestos was once a widely used material, is it absolutely not in use any more due to its harm to people.

 

where-can-you-find-asbestos

Why is Asbestos Bad for you?

Asbestos has been linked in to many cancers and also a wide range of respiratory and lung conditions too.

Asbestos was banned from use in the UK in 1999 and it has now been classed as a known human carcinogen.

The use of asbestos declined rapidly from the late 1970s onwards once research and trials were carried out that highlighted how dangerous asbestos could be.

It is still found in buildings and properties built before the year 2000.

 

What Makes Asbestos Toxic?

One of the main reasons why asbestos is so toxic is because it is so durable.

This is because asbestos fibres are practically microscopic, which means it has the unfortunate side effect of being inhaled very easily.

Inhalation of these fibres are extremely bad for you as they can stay inside your respiratory system, including the lining of your lungs and inner cavity tissue. The fibres can get lodged in the soft internal tissue as they are very small, but rigid in nature.

As it is difficult for the body to expel these fibres and they do not easily break down, inhaled asbestos can be deadly.

 

How Can Asbestos Be Removed?

Given the toxic properties that asbestos fibres contain, it needs to be handled with great care. If asbestos is located within a building, it should be removed by an asbestos removal contractor. They can assess what will be needed to remove the asbestos, perform asbestos removal as well as carefully dispose of the hazardous material for you.

 

Can I Remove Asbestos Myself?

It is strongly recommended to not remove asbestos yourself if you have no experience of working with the substance. This is because asbestos becomes most dangerous when it has been disturbed or moved in some way, as its fibres are then released. These fibres can then be inhaled directly into the lungs.

If you do decide to not use an asbestos removal contractor, you should seek advice from your local council and find out how it can be disposed of safely. Keep in mind you may need to get a Health and Safety Executive Licence (HSE) beforehand. This is needed if there strong chance asbestos fibres will be released into the air whilst work is taking place.

NACFB-Logo

Magnet Capital Become NACFB Patron

By Blog, Development Finance

Magnet Capital have today announced that they have become patrons of the NACFB, just 15 months after their official launch.

CEO Ashley Ilsen commented, “I’ve worked with the NACFB for many years whilst at a previous lender and their work is consistently excellent in representing our industry. We as an industry need to band together in order to continue to improve our standards and our practices and I believe the NACFB lead the way in helping to demonstrate how best to do this. It’s a wonderful nod of approval to have been accepted as a patron of the organisation so soon after our launch and a testament to the extensive experience and stellar reputation of the Magnet Capital team.”

 

NACFB-Logo

 

As a specialist provider of development finance, we believe that our niche offering will be invaluable to development finance brokers. We are extremely service driven and have a very powerful funding line behind us that most importantly allows us to move very quickly when it comes to assisting with a development deal. We are one of few lenders that meets every single individual that we lend to, which may seem slightly old fashioned to some, however I believe that genuine relationships are built only by face to face meetings.”

Managing Director Sam Howard commented “we have always believed in the power of trade associations, such as the NACFB to bring the short-term finance community together and uphold first class standards across the industry across all the stakeholders. We are delighted to become a patron and be part of this movement.

NACFB Managing Director, Norman Chambers said: “We’re thrilled to welcome Magnet at the latest lender Patron of the Association. Magnet will be familiar to many of our 1077 brokerages as they have previously exhibited at our annual Commercial Finance Expo.

“I’m delighted they have taken the next step in becoming Patrons of the trade body and we very much look forward to working with Ashley and the team in 2020.”

Magnet Capital recently announced that they have added two new recruits to their growing team.

subsidence

What You Need to Know About Subsidence

By Blog, Development Finance

Subsidence is a term feared by many homeowners. Subsidence is caused when the ground beneath a property sinks, which causes the foundations of a house lower and become misaligned. It can have a considerable impact on both the value, the living conditions and structural integrity of a house.

From a developer’s perspective, it is important to spot the early signs of subsidence and knowing what to look out for. Otherwise, a house with subsidence can plummet significantly in value.

There are various different causes for subsidence. It’s important to know what these are in order to better check a property for this condition. Some of the main cause of subsidence include the following:

Types of Subsidence

Cause

Damage Done
Soil Content Having soil with a high clay content can make it more prone to change volume, swelling when wet and shrinking when dry. This can cause the ground beneath the foundations of a house to become unstable, and lead to subsidence.
Leaks When there is a water leak around the foundations of a property, this can have a significant impact on the soil, causing it to swell or wash away depending on the soil content. This can alter the level of the ground beneath a property’s foundations, further causing subsidence.
Trees and Shrubbery If a house has trees and large shrubbery too close to its surroundings, this can drain a significant amount of moisture from the ground underneath the house, altering the level of the ground and causing the property’s foundations to sink.
Mining (Location) Houses that are built close to an old mining site can also be at risk of subsidence. This is due to the material in the mining site decomposing, altering the ground and impacting the structural integrity of nearby houses.

Whilst understanding the causes of subsidence can help to prevent it, spotting the signs of subsidence are also vital in helping to protect a house from the condition as best as is possible.

 

How to Check If a Property Has Subsidence

There are numerous ways subsidence can present itself, the main ones being as follows:

 

  • Cracks around doors and windows – cracks from subsidence can appear both outside and inside the house, they are typically found near a property’s doors and windows, and spread significantly faster than other types of cracks.

 

  • Crinkling wallpaper – when wallpaper begins to crinkle this can also be a sign of subsidence, typically being around where the wall meets the ceiling.

 

  • Doors and windows jamming – when you begin to have difficulty opening or closing any doors and windows to a property this could be due to subsidence; the sinking of the house’s foundations cause these features to become misaligned.

 

When spotting signs of subsidence, it’s vital that these are checked by a surveyor, who can inspect the property to confirm this.

house-subsidence

If you see cracks in walls, you could be dealing with subsidence

What to Do If My Property Has Subsidence

If you think your property is suffering from subsidence, it’s important to contact your buildings insurer as soon as possible.

Typically, the quicker subsidence is noticed the easier it is to manage. Your insurer will organise for a surveyor to come round and inspect the property. The surveyor can then confirm whether it is subsidence or not.

You can get insurance for subsidence, however most standard insurers will not cover a house that is, or previously has, suffered from subsidence. Therefore, when looking to buy a house it’s important to learn about its history, and whether it has at any point been affected by subsidence.

stamp-duty

How Does Stamp Duty Work for Multiple Properties?

By Blog, Development Finance

If you are buying one or more properties, it is important that you fully understand how stamp duty liability works, as it does not work in an identical way to buying just one house. But how do you understand the differences between the two? We take a closer look at the things you must be aware of before purchasing multiple buildings. 

What are linked transactions?

Knowing what is meant by a linked transaction is important when it comes to stamp duty liabilities, as this will determine how much you will end up having to pay.  In summary, a linked transaction is when a single party buys at least two properties from the same seller. This includes a piece of land, flats, or a house.

A transaction is also considered to be linked if the person connected to the buyer (for example, a business partner or relative) decides to buy a property from the same seller.

What’s more, if the purchase is part of a scheme or a single arrangement (or part of a number of transactions) then this is also considered to be a linked transaction.

How much stamp duty tax do I need to pay?

In terms of the exact amount you will need to pay if you are buying two or more properties (and these are considered by the HMRC to be linked transactions)  this will be calculated based on the total value of all these linked transactions. This is opposed to calculating the tax owed based on each property’s individual value.

For example: if you decided to purchase two properties, both worth £125,000, then the HMRC would require you to pay stamp duty on its total value of £250,000.

It is important to remember that you will not be required to pay stamp duty on the first £125,000 of a transaction’s value. However, you will need to pay stamp duty at a value of 2% over this initial amount.

That means that with regards to the example given above, you would be required to pay stamp duty that is worth approximately £1250 in total.

You should also keep in mind that Stamp Duty Land Tax has increased since 1 April 2016. This on top of current rates of purchases for additional properties that are residential. This includes second homes as well as buy-to-let properties.

Are there stamp duty exemptions for additional properties?

Yes, not every single property will be required to pay stamp duty. For example, this is no requirement for single properties or properties that are considered to be linked transactions with an overall value that is below £125,000.

plot-of-land

Is It Possible To Buy Land Without Money?

By Blog, Development Finance

In the majority of cases, if you are looking to invest in land or property, you will usually need in order to be able to finance such an investment, but it is possible to purchase with little to no money.

How do you achieve this? Prior to the financial crash in 2006, it was commonplace for mortgage lenders to happily provide 100% mortgages to buyers. These days, finding this kind of mortgage is extremely rare. We take a look at the different alternatives that are available to you, should you be interested in buying land but have little cash upfront to buy it with.

Borrowing against your own property

It could be the case that you do not have much in terms of cash, but do have a considerable amount of equity that is locked in your current property. If this sounds like you, it could provide a way in which you can purchase land, if you decide to extend the mortgage in order to release the equity locked up in it. That would enable you to then use these funds to invest elsewhere.

If you were interested in pursuing this option, there are some questions that you should carefully consider before making any final decisions. For example:

  • Not all mortgage providers will necessarily allow you to borrow additional money against your house so you can invest in property: this is something you will need to verify with your mortgage lender or broker.
  • The residential mortgage will be assessed on your income, so you will need to make sure you have enough earnings to be able to release equity.

Look at a joint-venture property development

Have you considered looking further into joint-venture property developments if you want to purchase land but have a small amount of money? It is worth taking a further look at.

But how does a joint-venture work in practice? The process is relatively straightforward in nature: you find a development project, research it and then look for another person to join the project who is willing to provide the deposit for it, and may also need to provide other forms of security.

This joint venture can work out profitable, as both parties ultimately share profits upon completion.

Providing additional security

Another potential option for you to be able to buy land with little money is to provide additional security to a lender. This is usually in the form of a high-value possession, in most cases this will be in the form of a property but could be a car or another costly item. Lenders in the property sector will offer 100% borrowing to purchase land if the collateral is given, is this presents less risk to the lender.

funding-property-development.

How to Refinance a Property Development Project to Avoid Fees

By Blog, Development Finance

There are a variety of things that can end up not going to plan when it comes to a property development project, even if you have planned the project well and manage things accordingly. For example, common issues that can cause construction site delays can be things such as extremely bad weather (for example, torrential rain) making it difficult for work to continue, an important supplier failing to deliver, or overbooked construction teams.

Unfortunately, these delays can lead to you incurring penalty fees if you have taken out development finance in order to fund the project. However, you  could look at development exit finance to help you avoid potential charges. Wondering how it could help you? We take a closer look.

Should you consider refinancing your development project?

Before going ahead and making the final decision as to whether or not you should refinance your build, you should carefully consider the options available to you.

For example, what are the terms and conditions of your current project, and would you have to pay additional fees for deciding to refinance that could outweigh any advantages when it comes to changing?

What’s more, is there room for contingencies: a general rule of thumb is to consider nine months into the project as the benchmark for potentially considering refinancing as an option (if you have taken out a 12-month development finance loan).

At this stage, it would be expected you were confident you were going to meet the exit deadline promptly, with most work having already been carried out by this point. If you are not confident that this will be the case, this would be when most developers would look at refinancing options available to them. 

Extending the borrowing term

In the majority of cases, property developers who decide to get development finance will have the term of this funding limited to just 12 months. This can make it very difficult timetable wise, should something go wrong with construction, or completing on sales.

This is why it is worth making sure you have arranged your development finance for the longest possible term either by doing it yourself or through an experienced broker. Furthermore, you should also find a provider who will not charge you fees for early repayment, in the event that you complete the project earlier than anticipated.

Reducing the cost of development finance

Exit finance rates can be cheaper than other kinds of development funding, meaning you can potentially save a considerable amount of money on the cost of lending if you are carrying out a construction project. In addition, interest that is accrued on exit finance is retained, which means that you can put all available capital on completing the construction project

Using refinancing to fund your next project

Not only can refinancing your development project reduce penalty fees should your project has delays, but it can also be useful for property developers looking to get their next project started, as refinancing can help fund this.

Many developers who are looking for cost-efficient ways to fund their project use refinancing in order to have site acquisition, design as well as planning all underway whilst currently finishing off a project. This means when the current project is finished, a property developer can immediately get started with the next construction build.