Category

Development Finance

sam-howard-magnet-capital

Opinion: The New Normal in the Development Finance World

By Blog, Development Finance, Opinion

It felt like the chains had been unshackled, as I stepped out of my car, in bright sunshine, at one of Magnet Capital’s development sites last Monday morning. For the first time in over eleven weeks, I was able to do what I enjoy most; visit our projects, see how they have progressed and chat with our developers and their team.

 

Except it wasn’t normal, I was sweltering in a mask and gloves, despite being on an open-air site, with the two bungalows at wall plate stage. I took my position a good two metres away from the developer, whilst the rest of his team were mostly at home, except for two labourers distancing in a corner of the site. Despite all this, the client was delighted to be back on site having lost a good six weeks due to lockdown, closed suppliers and scarcity of labourers. Thankfully roof trusses and windows were soon to be delivered, so that the site could continue with no delays. Roof tiles from Spain were causing an issue but he had a work around and frankly he is one of the lucky ones.

 

Across our extensive range of development sites at Magnet Capital, we have heard of difficulties for developers in getting bricks, block and beams and specifically those building materials, which require bespoke factory settings, such as windows and roof trusses. Factories are starting to open up but there is a backlog of orders. To comply with social distancing developers are faced with having only a skeleton crew on sites, which will be magnified when the properties are watertight and are working on internals. Hand sanitiser, cleaning of surfaces, face masks will all be necessary. Delays and rising costs are a reality for all our developers. As a development finance lender we have to be realistic that our clients projects will overrun their loan period and we need to help them either to extend their loans or source developer exit products.

 

The new normal is also opaque as to what will happen to the property market in terms of house prices and the mechanics of selling new build properties. There will undoubtedly be far-reaching economic ramifications but at the moment there is plenty of pent up demand. The Government’s lockdown measures resulted in an estimated £82 billion of house purchases placed on hold. Some early indications suggest that the market is springing back into life, with Rightmove stating 40,000 new sales having been agreed since 13 May and it saw its ten busiest days ever in May and June.

 

We are all going to be spending more time in our homes and spacious properties with gardens and nice views should be in demand, whereas flats in high rise blocks, requiring lifts and in urban areas with little outdoor space, might struggle. This could be accentuated by people increasingly working from home, with less need to be in urban areas, close to their place of work. The commute will become less of a burden on the psyche and the pocket, if people are working from home a couple of days a week, meaning that more living space, further out of the city centre, becomes much more desirable.

 

Agents will need to find ways to cleverly market their properties, offering virtual imaging cameras to create accurate floor plans and 3D simulations of properties, or filming short video tours inside. Potentially the new build market will outperform the second hand market, as the risks are lower visiting a vacant rather than occupied dwelling. The mechanics of buying and selling is further complicated by the difficulty in the current climate of getting valuations, surveys, searches, and dealing with the Land Registry. Sellers need to get all their paperwork ready and buyers need to ensure that they have a decent solicitor that is not stymied by working from home and surveyors that are willing and able to attend the property.

 

Last week felt like the mist was lifting and a sense of normality is returning, However, all we can do is take each day as it comes, as looking too far into the future of the property market is unwise in the best of times and especially in current times.

sam-howard-magnet-capital

Opinion: Stargazing in the development finance market

By Blog, Development Finance, Opinion

As I sit working from home with the news on a constant loop, the picture is forming of a dystopian world where  from a corporate perspective there will be few thrivers, aside for big tech, and the rest will be competing to be survivors.

Undoubtedly, the world is facing a crisis like we have not seen for probably a 100 years, and the impact on people’s lives has and will continue to be unprecedented in the short term. Reports are suggesting there will be a wave of soured UK commercial property loans, owing to the slump in retail property. Indeed, from the development finance perspective, restrictions on movement, the closing of building suppliers, the effective shut down of the residential property market for sales and rental has and will lead to serious delays. With regards to residential property, I believe this is overly bleak and once a vaccine and suitable drugs have been discovered, the UK’s passion for property will return.

However, whilst running a development business from my home office, in between Zoom calls, reviewing drone footage and photos of our sites, I wanted to do a bit of stargazing to see what changes for the better or worse might affect our industry. Clearly, I have no crystal ball but just a deep interest in the development finance industry.

An argument that is raging at the moment is whether Covid-19 will lead to a rise of nationalism over globalism. Given that the UK imports significant amounts of building materials, with one fifth coming from China, should the UK be focusing on ramping up domestic production? Whether it is electrical wiring, softwood timber, clay tiles, there is an argument that the UK should be fully self-sufficient. My guess is that there will be a significant move to on-shoring capabilities where possible, although of course some countries are better endowed with natural resources than others and we will still import where there is little alternative.

We are all starting to use technology more in our day to day roles, whether that is utilising: valuation software, drones for building inspections, or zoom sign up meetings. Therefore, shifting the belief that development finance underwriting can’t be automated and that the borrowers need to be met in person and the sites visited. With regards to the surveying profession, whilst physical valuations will still be necessary for the majority of development schemes,  we will see a degree of change , with more virtual monitoring inspections. However, this is likely owing to the rise of modular housing that will reduce the need for so many physical monitoring inspections, rather than Covid 19.

From a lender’s perspective no matter how much a system can be automated, you still need a human to make decisions and review the due diligence that the computer programmes produce. Face to face sign up meetings with the borrowers are crucial to assessing the risk of a development project. Yes ,you are also looking at the valuation information, the site details, cashflow, business plans etc but ultimately you are backing the individual/individuals. At Magnet Capital, we will be reinstating this, of course adhering to social distancing rules, as soon we can. So, don’t get rid of those meeting rooms just yet.

Which leads me on to the question of working from home. It is one that the industry has struggled with for many years. The mantra of management has always been, that you need to have your employees in the same physical space, to create the optimal working environment. The reality is that with modern technology it is possible to work efficiently and productively, without being in physical proximity.

Whether using slack, zoom, dropbox, xero, alongside a business’s existing databases, the ability to work remotely is, if not seamless then close to it. Avoiding the daily commute, not being crammed into a hot desk environment with little natural light, and having the ability to work flexibly is attractive. Now, I am not suggesting that office space is no longer needed but I think there will be a realisation that big expensive offices might need another look. It is of course about having the right systems in place and yes it is easier with a small team such as Magnet Capital’s who have all worked together for many years rather than a giant multinational.

The modern office will be reshaped, with perhaps meeting rooms and desks for those who need to be in rather than paying for a space for hundreds of people. And just a thought – perhaps from a residential development finance perspective, there might be opportunity for developers to turn the unused office space into flats.

To borrow a well worn but largely derided phrase in the financial markets that “this time is different” but I think in some ways it possibly could be.

 

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.

ashley-ilsen

Opinion: Why development finance might not be the same again

By Blog, Development Finance, Opinion

They say the construction industry is the first to enter a recession and the last to exit. I use the ‘R-word’ reticently in that we are nowhere near understanding the true implications of the current Covid-19 Crisis, on values and on the wider property market.  The last few weeks has seen various lenders pull product ranges, with development finance being one of the hardest hit sectors. However, as of today government guidelines do not prohibit construction or activity on construction sites, as long as public health guidance is being followed. In fact, across many of Magnet Capital’s development schemes that we are funding, progress is still excellent.

 

We are seeing a hard-nosed resilience that was perhaps born out of the destitution of what many builders and construction firms went through after the 2008 crash. In fact, just today I conducted a wonderful virtual inspection of a large site we are funding in Kent which was full of activity, with an appropriate number of tradesmen on site that are respecting the social distancing guidelines. Naturally, we do have a handful of clients that have closed their sites and in many cases this has predominantly been down to our clients need to protect vulnerable relatives at home. We have also seen many complaints about supply chain which the government is yet to sufficiently address and could cause further disruption beyond the Coronavirus crisis.

 

Beyond all the usual struggles for SME builders and developers, access to appropriate development finance will now become a serious issue. I say appropriate because for every quality development finance lender, there seems to be a handful trying to cut corners in our market. The landscape for development finance has changed dramatically in recent weeks but the one thing the development finance sector needs now more than ever is consistency. Having what I call a ‘Hokey Cokey’ approach to financing, where lenders decide to be in one minute and out the next, can be hugely detrimental to our sector and damaging to reputations. Consistency is key because it breeds confidence, which in turn trickles down from our brokers to the consumer.

 

The development finance sector has come a long way since the 2008 crash and indeed since I joined the market in 2012. It’s a small world and I really enjoy sharing thoughts with competing lenders and being able to speak candidly with our broker partners. One thing I think we can agree on is that this is very much a pull-up-your-socks moment for the development finance industry.

 

At Magnet Capital we have always been known as being a cautious lender and years of being conservative in our lending means that we are currently in a very strong position to serve our brokers and our clients. Having a sudden nose-dive in liquidity in the sector will undoubtedly cause serious problems for the wider property market far beyond the Coronavirus Crisis. Let’s keep doing what we’ve doing for years and continue to back the construction sector; they’re going to need it.

new-property-checks

What checks do you need to carry out on a new property?

By Blog, Development Finance

When purchasing a new property, there are many things you need to consider. Forgetting to carry out necessary steps before you decide to buy a house and continue with moving in could cause you problems in the future. For example, undiagnosed issues with the house could run you up an expensive bill or affect the value of the property.

Here is some advice to guide you through the property buying process and the things you need to check with regards to a new property.

  • Checking the electrics
  • Check the gas
  • Water and drainage search
  • Spot signs of damp
  • Look for rot
  • Age of roof
  • Consider the plumbing

 

Checking the electrics

Making sure the electrics are in good condition is vitally important. A survey on your house will not look at the state of these so it is well worth getting an Electrical Installation Condition report. This report will carry out the necessary checks to make sure the electrics in your property are safe. An electrics report could help you save thousands of pounds, as rewiring can be expensive.

Check the gas

When buying a new property, get a gas safety record (also known as a gas safety certificate) for your new home. Asking the current owners for this record on all appliances in the property is vitally important for your safety.

Appliances that are unsafe to use could lead to carbon monoxide poisoning, fires, gas leaks, and even explosions. Do not make the assumption that all gas appliances in your new house will be safe to use – always check.

If it has been over 12 months since the last gas safety record has been done, or the current owners are unable to provide a record, obtain one yourself. Contact a Gas Safe registered engineer prior to you moving in.

 

Water and draining search

Do not overlook the importance of checking water and sewage before buying a house. This is important, as it means you will not encounter unforeseen difficulties after you have purchased the property.

A Drainage and Water Search is typically carried out as part of the conveyancing process. Your conveyancing solicitor will contact the water company supplier for your home to check for things such as:

  • Whether there is a water meter
  • Where does the water supply come from
  • Are there sewers or water mains at the house
  • Are there any problems with water pressure
  • Who is responsible for drainage at the property

Does it have subsidence?

Subsidence can have a huge impact on a property’s structural safety as well as its overall value. Therefore, making sure it is detected before buying is key.

Subsidence is when the ground underneath your property sinks, over time this may cause your property’s foundations to become misaligned.

Signs of subsidence in your property include:

A crack in a property caused by subsidence will usually:

  • Have a width larger than 3mm
  • Be located close to a door or window
  • A diagonal crack wider at the top than at the bottom
  • Visibility is both on the inside and outside of the property

If you want to purchase a house that you suspected has subsidence issues, get a full buildings survey carried out.

 

Spot signs of damp

Damp can cause significant damage to your home, can be costly to fix and can also trigger health problems such as respiratory issues or allergic reactions.

 

crack-damp

 

As a result, checking for damp before buying a new property is well worth doing. Here are some ways you can spot the signs of damp:

  • Damp patches on walls and plastering
  • Water streaming down windows
  • Peeling wallpaper
  • Damaged plaster
  • Damaged skirting boards
  • Springy floorboards
  • Wall discolouration

 

Look for rot

Rot is caused when the timber has been exposed to wet conditions, and this can lead to a number of property problems. It is highly recommended you check for rot in the home-buying process. The signs of wet rot include the following:

  • Springy or bouncy floors – rot can affect floor joists or floorboards
  • Darkened timber – discoloration is caused by wet rot
  • Damp smell – rot can be a leading cause of this
  • Flaking paint or peeling wallpaper
  • Fungal growth – this is usually white, black or yellow in colour
  • Crack timber – usually linear
  • Spongy timber – when pressed

 

What is the age of the roof?

Checking how old the roof is on a property you want to purchase is another thing to consider. Replacing roofs can be costly, and newer roofs typically only last for 15-20 years in total.

 

Consider the plumbing

When viewing a property, ask if the pipes are lead and run the taps to see what the water pressure is like. You should also check if the boiler and radiators work in the building and how old these are.

bank-of-england

What does base rate cut mean for the UK property market?

By Blog, Development Finance

The Bank of England (BoE) has just announced a base rate cut of 0.5 percent following the outbreak of Coronavirus across Europe.  This represents the biggest cut since the financial crisis back in 2008. This emergency interest cut from 0.75 percent to 0.25 percent has been done by BoE to ease a possible recession and an overall slowdown in the economy if coronavirus spreads further into the UK.

What will be the expected impact for the property market following this base rate cut? Here is what is anticipated to happen.

  • Better mortgage rates
  • Will not apply to fixed-rate mortgages
  • Good news for landlords
  • Those applying for a mortgage will benefit
  • Positive news for property investors

Better mortgage rates

A historically low base rate will likely mean good news for those with mortgages. This is because a reduced base rate will likely then make interest rates on standard variable rate and tracker mortgages lower. This is down to the fact that the base rate is the interest charged by the BoE to borrow money, which is then reflected in the interest rates people in the UK pay.

The total amount that can be saved for a tracker mortgage will be dependent on if your mortgage is interest-only or not.

Unlikely to apply for fixed-rate mortgages

Unfortunately, if you have a fixed-rate mortgage (approximately 92.4% of all approved mortgages were fixed-rate in the final quarter of 2019) then the rate cut will not be passed on. This is because this mortgage term applies for between two and five years.

The only way you could potentially benefit is if you decided to remortgage your property. Think carefully if it is worth doing so, taking into account things such as cancellation fees.

 

Good news for buy-to-let mortgages

The base rate cut is good news for landlords, as almost all of the buy-to-let mortgages are provided on an interest-only basis. That means if interest-rates are reduced, it can only be advantageous for those with buy-to-lets.

 

Those looking to get a mortgage will benefit

If you are currently in the process of looking to buy a property and require a mortgage, now is the time to take advantage of mortgages being at historically low levels.

For example, the current base rate means this is a great opportunity to benefit from a low fixed-rate deal. A fixed-rate deal will mean that you can lock in a deal and if the base rate increases later on, you will not be impacted for the duration of the term.

 

Positive for property investors

Reduced interest rates are also better for property investors, as it helps to reduce the cost of borrowing for property development finance. It also increases the opportunity to boost profits in the longer term, thanks to the lower rate of interest.

gazumping-house

Gazumping – what you need to know about it

By Blog, Development Finance

If you are buying a property, or about to go through the process of doing so, you have likely heard of the term gazumping. But what exactly does it mean? If you are a buyer, making sure that you know what gazumping is key, so you are aware of the ways it may set you back, as well as what you can do to avoid it.

What is gazumping?

The act of gazumping is when another buyer puts in a higher offer on the property you are currently in the process of buying and the seller accepts this last-minute offer instead.

For anyone who has gone through the experience of having their offer accepted by a seller, only to have it suddenly rejected due to another buyer’s higher offer, can attest it is a difficult situation to be in.

 

What happens if I am gazumped?

For the majority of buyers who find themselves being gazumped by another buyer offer, there are really only two options.

The first is to make a higher offer than the other buyer who has gazumped you. This may mean having to pay a significant amount more, which may be out of your property budget.

The alternative, and for many there is no other choice, but to start all over again and carry out a new property search.

Is gazumping illegal?

No, as unpleasant as it is for buyers to go through, it is not illegal under English law. The property agreement only becomes legally binding once contracts have been exchanged, meaning that gazumping is effectively exempt.

You can see on a variety of property listings online are listed as ‘Sold STC’ meaning an offer has been received and accepted, but the sale is ‘subject to contracts’ meaning contracts have not come into exchange yet.

What are the consequences of gazumping?

Apart from the main consequence – losing the property you were buying-  other negatives include the high costs accumulated, as gazumping usually occurs later on in the property process. Buyers have usually already spent a considerable amount on surveys and paying a conveyancer, as well as arranging a mortgage.

When can gazumping happen?

Unfortunately, gazumping can take place at any time prior to contracts being exchanged between two parties.

The main reason gazumping occurs is, as previously mentioned, is because another buyer has made a higher bid than you. However, in a small number of cases, the reason could be down to timing issues. For example, if the property buying process is going too slowly (such as the conveyancing survey taking too long to complete) then the seller may choose another buyer who can move at a quicker rate.

 

How to avoid being gazumped

Here are the main ways you can reduce the risk of being gazumped:

  • Get the property taken off the market
  • Take out specialist insurance
  • Buy at auction
  • Move things quickly

 

Get the property taken off the market

When your offer is accepted by the seller, make sure you ask the seller to remove the property off the market. Ensure this been done in writing as otherwise, it will not be legally binding.

The same applies to estate agents listing the property. Ask them to remove signs from outside the house as well as removing the listing online.

 

Take out specialist insurance

If a seller decides to pick a last-minute higher offer from someone else and you do not want to outbid them, there is little you can do other than insure yourself. You can purchase home buyer protection insurance so that you can rest assured you can claim back things such as property surveys or conveyancing fees if need be.

 

Buy at auction

If you want to avoid the problem of gazumping outright, then consider buying a property at auction. However, make sure you are fully aware of how the process works, as it also comes with its own set of risks too.

 

Move things quickly

To reduce the risk of gazumping, it is in your best interest to make sure the process is moving as speedily as possible. What do we mean by this? Things such as making sure you are in very regular contact with your mortgage broker and conveyancing solicitors, as well as always responding quickly to information requests. You should also ensure forms are signed and returned promptly too.

brexit-house-prices

How has the property market improved in 2020 after the Brexit result?

By Blog, Development Finance

It is good news all round for the property market, ever since the UK general election outcome in December 2019 and since the country began its year-long transition phase in January 2020 out of the EU.

House prices rising rapidly

According to the recently published Nationwide index, house prices have been rising at a dramatic rate. In fact, they have been rising at the fastest annual rate in 18 months. For example, the average property increased in value by around £200 in February 2020. That means the average home is estimated to be worth £216,092, with inflation for house prices reaching 2.3 percent.

 

House prices rising in every region of the UK

In even better news, data compiled by the Land Registry has shown that house prices have risen in every region in the UK since the election result in December 2019. This is the first time it has happened in the last two years.

Data from the Land Registry shows that house prices increased by 2.2% in December, which is a rise from 1.7% in the previous month.

December 2019 was the very first month where prices increased in every single region and counties since February 2018.

 

Mortgage approvals are soaring

Not only are house prices in the UK on the up, but mortgage approvals too. This will be music to the ears of prospective buyers, with levels rising to the highest since before the Brexit referendum took place in 2016.

The latest figures, which are a part of the most recent money and credit report created by the Bank of England, show that approvals are at the highest since February 2016.

Approximately 71,000 mortgage applications were approved in January 2020, far exceeding recent forecasts made by property experts. The numbers are also four percent higher than in December 2019. In the last month of 2019, mortgage approvals were at 67,000.

 

Remortgage approvals rising in 2020

There has been a spike in the number of confirmed remortgages too in January 2020. Remortgage approvals in the UK are now up by 3.9 percent, with over 52,1000 deals approved in the first month of the year.

 

Why is the property market booming?

Property development experts believe that the landslide election outcome in December 2019 leading to a confirmed Brexit in January 2020 has helped to result in a more stable economic outlook. This has had a huge impact on buyers’ and sellers attitudes to the UK property market.

However, experts have also highlighted that if the coronavirus outbreak continues to spread in the UK, property prices could fall in the coming months.

 

 

coronavirus-property-market

How is coronavirus affecting the property market?

By Blog, Development Finance

Coronavirus has had a huge impact on the global economy, with share prices dramatically dropping at the same rate as the 2008 financial crisis and China’s economy is already suffering considerably. However, has the property market in the UK been affected so far? Only mildly.

Minor dips in the housebuilding market

So far coronavirus has only mildly impacted the property development finance market in the UK, with a small decrease in share prices. Housebuilding firms such as Berkeley and Vistry have seen their shares flatline and Crest Nicholson was down by 0.57%. However, the impact of the virus on house prices in the next coming months is not yet known.

A strong February for house prices

February was a good month for house prices, with the average price of a house increasing 2.8 percent compared to the same time last year. According to the recently published Halifax House Price Index, prices were increasing by 2.9 per cent per quarter, meaning that the average price of a property in the UK is now around £240,677.

There has been a stable level of both buyer and seller activity in recent months, far better than has been seen in recent years. Property experts strongly believe that this is because the jobs market is strong, borrowing rates are almost at a record low and the end of uncertainty regarding Brexit. Average house prices in the UK rose considerably in February alone. Many have seen that as a welcome return to a healthy property market. But, this may be at risk now due to the spread worldwide of coronavirus taking place at a rapid rate in the last few weeks.

 

Coronavirus could threaten UK house prices

Experts believe that if the coronavirus spreads more prominently to the UK, this could pose a significant blow to the housing market.

This is partly based on the fact that political uncertainty in the last two years had a huge impact on prices and the virus could have the same effect in causing falling price growth and transactions.

For example, new builds abroad have already stopped, with new travel restrictions in place meaning that it is more difficult for developers to attract interest from foreign investors.

In the long-term, this could be harmful to foreign investment if such restrictions are in force for a considerable period of time. It will also likely have a knock-on effect on house prices.

 

House buyers and sellers could put plans on hold

In a survey carried out recently by Benham and Reeves, their data revealed that 17 percent have already put plans on hold for buying or selling property due to the coronavirus.

If fears become more widespread, then market activity may fall once again despite an otherwise strong start to the year.

private-roads-public-roads

How is a private road different to a public road?

By Blog, Development Finance

As a property development finance company, we are commonly asked about the main differences between private and public roads. In this guide, we clarify the most frequently asked questions on private and public roads.

What are private streets?

Private streets (also known as unadopted streets) can be classified as roads that are not being maintained at public expense.

What this means is, is that council tax is not used in order to fund neighborhood expenses such as rubbish collections, road maintenance etc. That means councils are not legally required to carry out repair work on private streets should they arise.

This remains the case even if the public has a right of access to this private road.

If repair work is urgently required in order to make sure the street is safe, then the council may ask the residents on this private road to carry them out.

 

Do I receive lower council tax if I live on a private street?

No, the council will not provide you with a council tax reduction because you live in a building that is on a private street. It is worth remembering that council tax is paid to help with all the public services provided, not just for maintaining streets.

 

Can a private street be adopted by the local authority?

Yes, it is possible for private street ownership to be taken over by the local relevant authority, providing that they meet certain criteria.

For example, the private street in question will need to have met the local council’s adoption standard. These requirements can vary from authority to authority, but may include things such as improving lighting or curbs in the area.

 

How to find out if a road is public or private

If you want to find out whether a road is private or public, you can check this with the highway authority for the area in the UK. In most cases, this will be the local council.

The authority in question is required to keep a statutory list, available online, of all the highways that are being maintained at the public’s expense.

This means that if you see a road on this list, it will be a public road. If the road is not listed, it is almost guaranteed it will be a privately owned road, even if there is a public right of way so pedestrians can access it.

 

Is there a difference between a private road and a private street?

There is not a legal differentiation between the two, it is simply up to the local authority and others to determine which to use.

 

What are the advantages of private roads?

A private road can have a number of benefits. For example, this may be any of the following:

  • Less traffic and noise
  • A greater sense of community
  • More control over the surrounding area

 

Are there disadvantages to having private roads?

There are some potential pitfalls to private roads that it is important to be aware of.

For example, it is the responsibility of the owners of the property on that part of the street to maintain them if it needs repairing. If the residents on a private street disagree on the cost, it can cause problems.

Another potential issue can be if the street is not completely maintained. The private road could end up falling into disrepair and may cause safety problems.

Insurance costs also need to be considered, as if accidents occur on a private road the cost of a claim could be very high.