All Posts By

Daniel Tannenbaum

homes-in-neighbourhood

Government Announces £30m Funding Boost to Acquire Land for New Homes

By Blog, Development Finance

The UK government has recently announced that a funding boost of £30 million will be used to unlock surplus public sector land. This land will be used to build new homes whilst also supporting local economies during this turbulent period of the coronavirus pandemic.

 

This announcement was made at the annual conference for the Chartered Institute of Housing, Lord Agnew – cabinet office minister – stating that the government will be boosting its One Public Estate (OPE) programme as well as its Land Release Fund (LRF).

 

Those in the industry, have provided interesting responses to this new announcement,  including the likes of ilke Homes executive chairman David Sheridan, who has stated: “I welcome the government’s efforts to release surplus land for housing as part of a boost to its Land Release Fund and One Public Estate Programme.”

 

“However, to really kickstart a housing boom, government policy should be more ambitious. Ministers must be proactive in bringing land forward and designating parcels exclusively for factory- built homes.”

 

“This will help accelerate the pace of housing procurement and delivery in the UK – cutting construction programmes by almost half – which will be pivotal to any post-Covid-19 recovery plans.”

 

“Housing associations have a key role to play in using their own funds and their own land to boost the supply of affordable housing and should be encouraged to collaborate closely with Homes England and other stakeholders.”

 

One Public Estate – £10 million will be provided through this programme, helping to support early stages of development.

 

Through this programme, partnerships both new and already existing will have the opportunity to bid for support in delivering ambitious programmes – these programmes concerned around the deliverance of homes, jobs and improved public services.

 

The Land Release Fund – £20 million will be provided through the LRF, of which councils will have the opportunity to bid for to develop their surplus sites for housing.

 

The LRF targets specifically small sites, its support focused around SME builders.

 

Chairman of the Local Government Association, Councillor James Jamieson, has stated the following on the matter:

 

“Councils continue to lead their communities through the coronavirus crisis, working closely with other local partners including health and emergency services.”

 

“One Public Estate will play a crucial role as we move into the next phase and help with the local and national economic recovery.”

 

“This additional funding will support councils to make better use of their assets, including their spare land and property, to help join up local services.”

 

“This in turn will create new savings and efficiencies, as we look towards the future of local public services after the pandemic.”

eco-friendly-hand

Net-Zero Building Standards Don’t Have to Be Costly – Study Reveals

By Blog, Development Finance

A new report published by the UK Green Building Council (UKGBC) reveals that building to net-zero targets doesn’t have to be costly, and could likely enhance a project’s value.

 

The report by the UK Green Building Council, titled “Building the case for net-zero: A feasibility study into the design, delivery and cost of new net-zero carbon buildings”, explores implications of following net-zero standards throughout building development projects.

 

To help with this exploration, the report enlisted the help of designers, cost consultants and engineers, whose expert inputs have helped to create a clear look into applying net-zero targets to building projects.

 

The UKGBC Study

Throughout the study, two real-life building projects were examined, both at the design stages of their development, with one being a residential block, and the other being an office building.

 

Taking these two projects, the team then created two additional iterations to each of their designs, one aiming to meet the net-zero targets for 2025, and the other shaped by the targets for 2030. These two iterations were labelled the “intermediate” and “stretch” scenario respectively.

 

For the “intermediate” scenario of the residential block’s design, traditional gas boilers were replaced with air source heat pumps, in addition to other tactics to improve insulation and minimise heat loss.

 

In the same scenario, the office building design was altered by trading in the conventional structure of steel and concrete for a hybrid of steel and cross-laminated timber, as well as introducing active chilled beams and removing certain fitout finishes.

 

The Findings

 

For the “intermediate” scenario, aiming to meet the net-zero 2025 targets, analysis found that the cost only went up by 3.5% for the residential design, and 6.2% for the office building. It was also suggested that these costs were likely to be offset by the increased value and reduced costs for operating.

 

For the “stretch” scenario, analysis found that the cost for the residential building would be up by 5.3%, whilst the office building could range from between 8% and 17%.

 

Chief executive of the UKGBC Julie Hirigoyen commented: “We’ve known for some time that taking action to make buildings greener today will add value and save costs in the longer term. But the precise cost benefit analysis of achieving net-zero carbon standards on new buildings today has remained elusive.”

 

“This study provides long-awaited evidence that building today to the standards of energy and carbon efficiency required by 2025 doesn’t have to cost a fortune and is likely to be offset by enhanced value (e.g. higher rents, reduced running costs, higher sale price, reduced offsetting costs etc) in due course.”

construction-worker-with-plans

CHAS and NFB Help to Raise UK Construction Standards With Renewed Partnership

By Blog, Development Finance

The Contractors Health and Safety Assessment Scheme (CHAS) and the National Federation of Builders (NFB) have recently renewed their partnership, committing to the promotion of high operating standards throughout the industry.

 

The NFB represents builders and regional contractors throughout both England and Wales. It is one of the country’s longest standing trade bodies, created to not only represent professions in building, but furthermore to improve the conditions NFB members need to contribute to a successful UK economy.

 

CHAS managing director Ian McKinnon has made the following comments on the partnership:

 

“We are delighted to be renewing this important partnership which will help construction firms of all sizes demonstrate compliance and build their businesses.”

 

“Both CHAS and the NFB have gone from strength to strength since we first joined forces in 2018 so it is exciting to be able to bring an even greater range of benefits to our respective memberships.”

 

What Does the Renewed Partnership Include?

 

Through the NFB’s membership with CHAS, they will be eligible for assessment to the new Common Assessment Standard.

 

The Common Assessment Standard has been built with the aim of standardising the prequalification process, enabling both contractors and their clients to improve the efficiency of supply chains and find business opportunities that are reliable.

 

This standard helps companies to attain compliance and accreditation easier than before. These standards streamline the supply chain of construction, and is known as the “gold standard” throughout the industry.

 

CHAS will also enable NFB members to demonstrate their commitment of operating with high ethical, safe and sustainable standards. This opportunity will be provided to the NFB by CHAS through third party accreditation packages.

 

As part of the partnership agreement, CHAS will also offer all valid members of the NFB a discount of 20%. Contractors part of the NFB will be visible to CHAS’s 1,500+ clients via their client portal upon order purchase/accreditation.

 

In return for this, the NFB will offer CHAS contractors a discount of up to 10% when joining. This discount will also be offered for renewals following their joining, providing contractors with a range of benefits such as business services and training support.

 

The NFB’s chief executive Richard Beresford has been reported to comment: “We are very happy to be renewing this agreement with CHAS which will help our members’ businesses prosper while opening up a range of benefits to CHAS members.”

London-city

The UK’s Second Most Expensive Home Now Up for Sale in London

By Blog, Development Finance

Headlines exclaim “Billionaire Wanted” as the second most expensive property in the UK hits the market. Priced at £185 million, this mansion sits on 1-18 York Terrace East, London, and was designed by the famous Buckingham Palace architect John Nash. Nash is renowned for his design of the capital’s royal palace as well as Brighton’s Royal Pavilion and Regent Street.

 

The firm currently pushing to sell the huge property have claimed that someone with “billions” who currently wants to find a property in the UK should inquire.

 

The mansion was built between the period of 1821 to 1826, its current owner Zenprop UK, a property investment firm, speculated to have originally purchased the property four years ago for £200 million. However, despite these claims, the chief executive of the firm has commented that the property was purchased for below the price it is currently listed at.

 

The Daily Mail reported comments made by Zenprop UK’s Derrick Beare claiming that the sale “is not for me to make a return, it’s pretty much to get my money back and move on.”

 

“The current price is a result of Brexit and the pandemic. It should be more, but I don’t think I can get more in this market. It won’t appeal to many people but we only need one person. The kind of person with billions, who wants a place in London.”

 

About The Property on 1-18 York Terrace East, London

 

This newly updated property was originally intended as 18 separate homes, however, after WWII was converted into government offices. During the war, the building was almost demolished after suffering bomb damage, however after public outcry was saved, and most of it afterwards used by the Ministry of Works.

 

In 1967, the terrace was when transformed by the International Students Trust into luxury student accommodation. The property was then used as a home for students studying around the area until it was sold in 2016 to Zenpop UK.

 

Zenprop UK are associated with the South African premier property development and investment company Zenprop Property Holdings. The firm agreed to a long leasehold extension, and have been restoring the building to residential use for over three years.

 

Beare is reported to have insisted there is interest for the property – of course, from incredibly wealthy prospective buyers – one even considering placing a bid of over £200 million. However, due to Brexit this buyer had pulled out.

 

The mansion now stands complete, Grade 1 Listed and 117,000sq ft, thought to be the first time in history that an entire Nash terrace has entered the open market.

man-signing-mortgage-application

Mortgage Application Fraud Rises in the UK

By Blog, Development Finance

Whilst mortgage application approvals have recently increased, benefiting both customers and the economy more widely, unfortunately, alongside this has been a rise in mortgage application fraud.

 

The Bank of England reports that both mortgage approvals as well as lending figures overall rose during the month of June – approvals relating to house purchases in particular rising from the record-low figure in May of 9,300 to 40,000.

 

The central bank stated throughout their Money and Credit report that “The mortgage market showed some signs of recovery in June, but remained relatively weak in comparison to pre-Covid. On net, households borrowed an additional £1.9 billion secured on their homes.”

 

Post-covid, the UK government has offered two rounds of mortgage holidays, both three-months, to offer help to homeowners. This scheme was reportedly taken up by 1.9 million households in the UK.

 

The report further claimed that whilst this was indeed higher than May’s £1.3 billion, it was still “weak compared to an average of £4.1 billion in the six months to February 2020.”

 

Furthermore, the Money and Credit report explained that “The number of mortgages approved also increased in June. The number of mortgage approvals for house purchase increased strongly, to 40,000 up from 9,300 in May” however, “approvals were 46 percent below the February level of 73,700.”

 

Whilst reports of this rise, albeit comparatively low to pre-COVID months, is welcome news to the sector during this turbulent period, SmartSearch, an anti-money laundering service, has revealed that the UK is also experiencing a rise in mortgage application fraud – up 5% during last year with a concerning 13% of adult Brits thinking exaggerating their income on an application was “reasonable”

 

SmartSearch CEO John Dobson, reported by the Express, claimed that “Applying for a mortgage can be an exciting and also daunting task, with many first-time buyers unsure of what to expect during the rigorous application process.”

 

“It is important to remember that a mortgage is a significant financial commitment, and making exaggerations or withholding any changes in circumstances may result in you being investigated for money laundering and fraud, making it more difficult to secure a mortgage or other financial products in the future.”

 

What Is Mortgage Application Fraud and How Do I Avoid It?

 

With mortgage application fraud, individuals will provide false evidence to support their application for a mortgage. SmartSearch have suggested some of the following considerations to take into account during the mortgage application process, all of which should be handled with care to prevent red, money-laundering-related flags:

 

  • Register on the electoral roll so that you can prove your identity to lenders – “If you’re not registered on the electoral roll it is just about impossible to secure a mortgage” SmartSearch claims.

 

  • Disassociate from ex-partners you could still be financially linked to via the credit reference agencies.

 

  • Explain and provide evidence of where the source of your deposit has come from (particularly important when the deposit has been gifted to you, or is from inheritance).
building-construction-site

UK Construction Sees Sharpest Rise in Nearly 5 Years

By Blog, Development Finance

The building industry shows promising signs of a strong recovery after the COVID-19 pandemic, as UK builders report to have experienced the sharpest rise in monthly activity in nearly five years. This rise came during July this year, residential building reported to be the main driver for this significant boost in activity.

 

The rise comes as excellent news for the UK government, who are reported to be relying on this particular sector to help be a driving force in the country’s economic recovery – PM Johnson himself using the slogan “build, build, build” whilst describing the intentions for the post-lockdown economy’s revival.  New and upcoming “once in a generation” reforms have recently been announced to the country that will help to ease certain building restrictions.

 

However, even with these promising results, as concerns surrounding the economy still remain significantly high, the sector has experienced a decline in workers. IHS Markit’s economics director Tim Moore told the Financial Times:

 

“Concerns about the pipeline of new work across the construction sector and intense pressure on margins go a long way to explain the sharp and accelerated fall in employment numbers reported during July”

 

The Government’s Plans for Construction Post-Lockdown

 

Despite this reported decline raising concerns, the UK government has predicted that this drive in construction will create many more jobs throughout the sector, further helping to push for economic recovery following the COVID-related lockdown measures.

 

On the 21st July 2020, Parliament laid out new laws that will enable homes to be built where unused buildings currently stand, without the need for full planning applications. Alongside this, retail and commercial properties will be able to be repurposed quickly in a bid to revive town centres and high streets.

 

Housing Secretary Robert Jenrick has commented the following on the matter, stating that:

 

“We are reforming the planning system and cutting out unnecessary bureaucracy to give small business owners the freedom they need to adapt and evolve, and to renew our town centres with new enterprises and more housing.”

 

“These changes will help transform boarded up, unused buildings safely into high quality homes at the heart of their communities. It will mean that families can add up to 2 storeys to their home, providing much needed additional space for children or elderly relatives as their household grows.”

 

These new rules, set to apply from September, follow on from other measures recently announced to help support home building throughout the country, of which include the addition of £450 million to the Home Building Fund, whilst a new £12 billion programme for affordable homes will help to provide up to 180,000 brand new properties.

ground-rent

FCA Confirms Second Round of Mortgage Payment Holidays During Covid

By Blog, Development Finance

The FCA has confirmed that they will offer a second round of mortgage payment holidays, continuing to help those homeowners who may have been financially implicated during covid-19.

 

Around 1.8 million households used a mortgage payment holiday for three months from the start of thelockdown period, as a way of offsetting any financial uncertainty or loss of income due to unemployment.

 

In total, around 20% of the UK’s population benefitted from the mortgage holiday scheme, giving the average household a saving of £755. The FCA also introduced a similar scheme for other kinds of credit and financial products including personal loans, credit cards, car loans and an interest-free overdraft facility.

 

Residential homeowners and those who offer buy-to-let have until 31st October 2020 to apply through their bank or mortgage provider. The process is usually completely online, streamlined and fast-tracked, offering almost instant approval, with no evidence of financial hardship needed or affordability checks.The Financial Conduct Authority’s interim chief executive, Christopher Woolard said upon issuing a further three-month scheme:

 

christoper-woolard

Christopher Woolard explains that the three-month mortgage holiday is necessary to address the ongoing situation surrounding covid

 

“Clearly, if there are further restrictions that need to be placed for health reasons; if the situation becomes
more complicated in some way, then we’ll have to think about how we adjust to those circumstances.”

 

However, Woolard expressed his belief that half of the people who used the initial mortgage payment
holiday from March to May were now able to pay.

 

“About half of that group are people who perhaps thought they were going to lose a job or have some other kind of impact, and in fact they’re in a position where they could still afford to pay now that that ninety-day period is coming to an end.”

 

Woolard emphasised that while lenders suffered the burden in the short-term, borrowers will feel the effects when it catches up in the longer term through extended mortgages and rolled-up interest.

 

“It’s everyone’s best interest to actually get back towards payment wherever that is possible or even partial payment, but we have to recognise that there’s an ongoing situation here,” he said.

 

Homeowners get access to a three-month mortgage holiday, whereby payments are deferred until a later today or carried onto the end of the mortgage term. Applying or using a mortgage holiday through the Government’s scheme will not impact your credit score or ability to access finance from elsewhere.

 

During the coronavirus period, the Government and FCA have also confirmed that no repossessions by mortgage lenders or banks will take place, giving property owners breathing space if they need it.

 

ashley-ilsen

Opinion: Ashley Ilsen Discusses The Latest EY Report

By Blog, Development Finance, Opinion

It says a lot about the rapidly changing face of our market that the data produced by Ernst & Young,
changes significantly year on year. Now in its third year, the annual EY Bridging Market Study is one
of the widest data samples that we have for the short-term lending industry. It is also unfortunate
that the survey was conducted just before the Coronavirus pandemic started to hit the UK and I’d
implore the good people at EY to perform a follow-up study on their short-term findings later this
summer.

We have undoubtedly entered a period of short-term uncertainty and the true impact of
the Coronavirus on our market will not become completely apparent for some time. We can,
however, look at their long-term results with great interest and we can also look back at what
lenders and brokers have reported about 2019. Here are two key areas:

A crowded space

Interestingly, 67% of those surveyed reported that they have found competition increased in the
bridging market in 2019. Similarly, an increase in competition was cited by lenders as the biggest
challenge ahead for 2020. At Magnet Capital we have also seen a proliferation of lenders moving
into development finance, which I suspect is an overflow from what is now a very crowded bridging
sector.

From my own experience I’ve noticed from conversations I’ve had with other lenders that an
overcrowded space has been on everyone’s minds for some years now, and yet every year we seem
to be adding new entrants. A growing market should allow for more capital deployed (not
necessarily more lenders) but considering the effects of Coronavirus, surely we’ve now reached a
point where lenders will either need to exit or merge?

I did also spot a brave new face entering the bridging market just earlier in April 2020 and my hats off to them! Competition has historically pushed lenders to lower rates and higher up the risk curve. Respondents confirmed that average monthly interest rates were lower in 2019 than in the previous year, and LTVs were higher. Having reached the peak it will be interesting to see on what other battlefronts lenders will compete. For me there is one clear area that stands out.

Are we bit old fashioned?

One of the biggest trends seen from last year’s survey is the continued prominence of technology in
our sector. Some 39% of respondents now believe that open banking would significantly improve the
obtention of new business, and this is in addition to the use of AVMs and further automating of the
underwriting process. It’s somewhat apt that in the current crisis use of technology is now a
necessity rather than a luxury and I expect the pandemic to accelerate the need for lenders to invest
in their tech.

At Magnet Capital we focus heavily on our internal technology in order to streamline
the underwriting process and this has been a primary source of focus since our inception.
Conversely, I’ve always been a big champion of old fashioned lending practices and there is
ultimately no replacement for face-to-face to meetings with clients and a first-hand inspection of a
project or a property (no matter how much we’re all enjoying Zoom conference calls at this time).

This is also taking into account that 52% of lenders noted refurbishments as being the primary use
for bridging loans. This inherently raises the challenge of bridging lenders needing to be even more
hands on in a business environment that is still learning how to remain socially distant.

What is Regulated and Unregulated Development Finance?

By Blog

Understanding what is regulated and what is not in the development finance can be sometimes be a little tricky.

Typically, the rule is:

  • Any residential development finance is regulated
  • Any commercial development finance in unregulated

 

Regulated Activity

When borrowing against a residential property (such as a flat or home), the FCA enforces various rules and regulations to protect consumers, especially if the property is their primary form of residence and ultimately they want to avoid the borrower losing their home and finding themselves on the street.

As a rule, any development finance applications become regulated if 40% or more of the property is used as a residence or dwelling. Examples include buying a plot of land in order to build a new home or if you are building a property in the garden of the customer’s home.

As a consumer or borrower, you know that you have protection in place with your lender should something go wrong – although the application process is usually a lot more thorough. For any mortgage brokers and consumer credit providers, senior managers must be approved by SMCR (Senior Managers and Compliance Regime) to ensure accountability and responsibility for any decisions, risks and action taken.

Regulated activity includes:

First charge – As a first charge mortgage which is the individuals main mortgage and the first thing that is ‘charged’ each month from their bank account.

Second charge – This is a second mortgage on an existing home or different property – it is second in the list of priorities to be paid, hence it is the ‘second thing that is charged’ from your bank account. You can typically borrow less than the first charge mortgage, because the lender is now a second priority – so if you struggle to keep up with payments, your first charge is paid first, and then your second.

 

construction

Unregulated activity

With more than half of development finance deals being unregulated, they are used for commercial properties including:

  • Offices
  • Factories
  • Shops
  • Gyms
  • Garages/Stations
  • Business purposes

Being unregulated, the FCA has no protection or supervision in this area. There are of course regulatory guidelines for lenders and brokers such as the Mortgage Credit Directive and other rules that lenders must adhere to.

Loans are typically by way of second charge or they are formed as loans for limited companies, rather than individuals.

The amount you can borrow through unregulated activity is usually higher than with regulated and they are able to take a view on adverse credit histories – which may suit some businesses and developers more so.

ground-rent

What is Ground Rent?

By Blog, Development Finance

Ground rent explained

The ground rent is the monthly fee that a homeowner pays to the holder of the leasehold property. So if the property you are living in has a leasehold, you can expect to pay a ground rent every month for essentially living on that land.

This is different to if you are freehold, because them you essentially own the land. But you are required to pay ground rent even if you have a mortgage and own the property.

How much ground rent will I need to pay?

The exact amount you need to pay will be specified in your lease, but you can expect this to be around £370 per year. In the majority of cases, ground rent is an amount of money paid either in one instalment or can be asked for on a quarterly or half-yearly basis.

If there is more than one leaseholder, then regardless of whether or not they own the property as tenants in common or joint tenants, every leaseholder has the responsibility to pay the ground rent.

Any details regarding your responsibilities to your freeholders, such as ground rent or other potential liabilities are detailed in the lease. To make sure you are fully aware of the responsibilities you have and to avoid problems at a later date, it is important that you make sure you have the asked a leasehold qualified solicitor to look over the lease before moving in.

How can I avoid ground rent increases?

Making sure you have taken on a qualified solicitor is one way to avoid the potential increase, or at least be aware of them and factor them into consideration when purchasing a house, as many buyers can get caught out, being unaware that it is possible for ground rent to potentially double every few years. This has become very hot in the media recently.

It is vitally important that you know about ground rent increases before trying to purchase a property or trying to gain access to development finance, as it could impact your ability to get a mortgage or other kinds of funding.

What is meant by fixed or escalating ground rent?

There are two different types of ground rent, and these are known as fixed and escalating.

Fixed means that the amount you will be required to pay will not change for the duration of the lease, whilst escalating ground rents mean it will increase over the course of the lease. Whether the ground rent is fixed or escalating will be confirmed in the lease.

What is a ground rent review?

A ground rent review is when the freeholder is looking to increase the ground rent. If a ground rent review is requested, then it mostly works in the way mentioned below:

  • The freeholder informs the tenant that they would like to increase the ground rent, whilst stating what they want this rent to be. It is necessary for the lease to designate how long before the new rent will then become payable if the notice is served (for example 6 months or 12 months).
  • The leaseholder can either agree to new rent or suggest a different offer.
  • If the leaseholder and freeholder fail to make an agreement it will usually be passed onto an arbitrator that has been appointed by the Royal Institution of Chartered Surveyors (RICS).

When is the ground rent paid?

Unless it has otherwise been stated in your lease, this is usually paid at the end of the year or bi-annually.

What happens if you do not pay the ground rent?

There are two scenarios that may result in you not paying the ground rent. This is either because you cannot afford to pay the rent, or you have not been asked by the freeholder of the property to pay the ground rent.

lease-ground-rent

If you cannot afford to pay ground rent and the freeholder demands it, it is possible for them to take legal action to settle the cost.

What do I do if the freeholder has not asked for the ground rent?

Unless your freeholder asks for the ground rent, it is not required for you to reach out and pay. This is because any demand for ground rent by the managing agent or freeholder needs to provide notice. This will need to include:

  • The duration that the ground rent demand covers
  • The name of leaseholder
  • The name of freeholder and address
  • Amount of ground rent required for a period
  • Name of the managing agent if applicable
  • When payment is required

Is it possible to reduce your ground rent?

Yes, there are two ways to decrease the amount of ground rent you pay. You can either extend the lease under the formal process or by collective enfranchisement.