Category

Development Finance

What is involved in a property survey?

By Blog, Development Finance

Property surveys form an important part of the property development finance process. We take a closer look at what you need to know.

What is a property survey?

This is an inspection of the property’s overall condition, which is assessed by an expert surveyor who visits the building and prepares a property report based on their findings.

The surveyor is able to determine if there are any problems with a property that are a cause for concern for the prospective buyer.

 

What does a surveyor look for?

The property surveyor will be able to check if there any structural problems with the building, such as subsidence issues or unstable walls. They can also check to see if major alterations or repairs are needed to be carried out (such as fixing the roof) before it can be used.

 

When is a property survey carried out?

In most cases, once the homebuyers’ offer has been approved by the seller, the property is assessed by a surveyor.

Types of property surveyors

When getting a property survey, you should make sure that the surveyor you have chosen is accredited by one of the following bodies:

  • SAVA or RSPA – the Residential Property Surveyors Association
  • RICS – the Royal Institution of Chartered Surveyors

It is worth remembering that surveyors from these accrediting bodies offer different types of surveys. For example, RICS surveyors provide three ‘levels’ of a property survey, involving a Condition Report, Homebuyer Report, and a Building Survey.

 

Is a property survey the same as a mortgage valuation?

No, a mortgage valuation is simply a brief assessment of a property to see how much it is roughly valued to be. This valuation is a requirement for most mortgage lenders in order to justify the loan amount.

A mortgage valuation is definitely not as comprehensive (nor can it replace) as a house survey.

 

What is the cost of a property survey?

The cost of a property survey is upwards from £300. The amount paid will be largely dependent on the type of survey you choose. We will go into further details as to the types of property surveys there are to choose from in the next section.

 

What types of property surveys are there?

  • Condition Report (survey level one) – the cheapest and most basic survey available. It provides a summary of property defects and potential risks, as well as ‘traffic light’ indications as to the state of different parts of the building.
  • HomeBuyers Report (survey level two – survey only) – details major problems, non-intrusive survey
  • HomeBuyers Report (survey and valuation), – includes a survey as well as valuation and an insurance reinstatement value as well
  • Home Condition Survey – offered only by RPSA, also provides practical information including damp assessments.
  • Building Survey (survey level three) – by RICS surveyors. The most expensive option, but they are extensive surveys and you are given a report.

 

What type of property survey should I get?

As already briefly mentioned, there a range of property surveys to choose from. The one you should opt for will depend on the depth of the property survey you are looking for, as well as your overall budget.

 

How long does a property survey take?

It will depend on the level of survey you have chosen and the size of the building which will be assessed.

On average:

  • A level-one property survey may take up to an hour to complete
  • A level-two property survey make take up to four hours
  • A level-three property survey may take up to a full working day to complete

 

Do I need to get a survey?

It is highly recommended that you get a property survey before you purchase a property. This enables you to make a fully informed decision about the building and the amount you will be willing to pay for it. Depending on the result of the survey, you can also allow for a budget for repairs that may need doing.

It can also be an excellent way to negotiate the price with the seller, depending on the outcome of the survey.

house-build

How to Maximise the Value of a Property

By Blog, Development Finance

There are many things households and developers can do to increase the value of their property, from small redecorating jobs to loft conversions and kitchen extensions. Whilst bigger projects will typically add the most value to a property, there are a range of different ways to make the most out your space, regardless of the budget.

Below are a range of different ways to maximise the value of a property:

  • Creating extra parking spaces
  • Adding insulation
  • Loft conversion or extension
  • Small redecorating jobs
  • Sprucing up the garden

Those listed above can help you make the most out of your property, adding to its appeal and further it value.

 

Creating Extra Parking Spaces

Creating extra parking spaces could add considerable value to a property. In some areas (like Central London) parking is a sought after feature that many are willing to pay extra for or rent out to the public for events or work days.

If the property is located in the right area and has enough free space, it might be good to consider adding some off-street parking to push up its value.

 

Adding Insulation

Properly insulating a development can have multiple benefits. Not only can proper insulation cut down the cost of your monthly heating bills, it can also make a property more energy efficient, boosting its EPC rating and subsequently its value. See our guide on how to save money on developing a property.

You can insulate cavity walls, as well as the loft/roof to improve its energy efficiency. Additionally, double glazed windows can help to keep heat in whilst also shutting noise out; adding value in terms of energy efficiency whilst preventing damage to value from noise pollution.

 

Loft Conversion or Extension

Bigger projects, such as a loft conversion or extension, can add significant value to a property. Adding new spaces can make a property more appealing to buyers and also attract buyers who would not have initially looked at the property.

For example, by turning the loft into another bedroom you open up the property to those wanting more bedrooms/space. Adding extra bedrooms (and rooms in general) also increases the value of a property.

 

loft-conversion

Adding a loft conversion can boost your property’s value by 20%

 

Extensions to kitchens, dining rooms and more can also greatly add to the value of a property, opening these rooms up and making bigger, more attractive spaces.

A loft conversion will typically increase the property’s value by up to 20% and a new kitchen can add 10% to 15% in additional value. This kind of work will typically require planning permission.

 

Small Redecorating Jobs

Whilst bigger projects usually add more value to a property, the smaller redecorating jobs can also have a big impact on its overall look and appeal. Having leaky taps, broken lightbulbs and peeling paint whilst seemingly small issues can make a property look run-down and unattractive.

Some of the smaller jobs you can then do to spruce up a property are as follows:

  • Fixing dripping taps.
  • Cleaning dirty walls.
  • Removing built up limescale in the bathroom and kitchen.
  • Replacing broken lightbulbs.
  • Repainting walls.

Although some of these features may not seem like much, collectively they can all help to make a property look more attractive, and potentially add value.

 

Sprucing Up the Garden

Having a tidy and well-designed garden can do wonders to the value of your property, creating an additional space for people to entertain and relax in. Cutting back any overgrown grass and removing any weeds can help to tidy up the area, whilst adding new plants, outdoor furniture, or even small water features can turn it into a beautiful new space in the property.

 

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.

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.

sam-howard

Housing and the Climate Crisis

By Development Finance, Opinion

Walking past the Extinction Rebellion protest in Bishopsgate, a few weeks back, whether you agree with their tactics or not, brought the reality into focus, that our planet is in serious trouble. The onus is on every single one of us to do more and it will require a concerted effort.

Given that Magnet Capital’s focus is to support our SME Developer clients in building the right new build houses in the right places, it is pertinent to shine the spotlight on what new homes can do to help the country meet its target of reducing greenhouse emissions to net zero by 2050. The new and existing housing stock currently accounts for circa 20% of emissions.

Somewhat under the radar, the Government in its 2019 Spring Statement has turned its attention to residential housing emissions by including a commitment that, by 2025, they would introduce a Future Homes Standard for new build homes. This would include low carbon heating and world-leading levels of energy efficiency. The Government has now published a new consultation, setting out these plans, which is open to responses until 10 January 2020. This consultation marks the first step towards implementation of the 2025 Future Homes Standard, proposing to tighten the standards on energy efficiency and ventilation in new homes as of late 2020.

It includes two options:- the first is a 20% improvement on carbon dioxide emissions by ensuring new build houses have triple glazing and a waste water heat recovery system.

The second would result in a 31% improvement which require only double glazing but crucially low-carbon heating and/or renewables such as photovoltaic (solar) panels.

The government’s aim is for the housing industry to develop the necessary supply chains, skills and construction practices to deliver low-carbon heat, and highly energy efficient new homes by 2025. Crucially, it has been rumoured to include the banning the installation of fossil fuelled heating systems in homes built from 2025. Whether this means gas boilers will be banned for new builds is a matter for debate, given there are genuine concerns over whether alternatives such as air source heat pumps are viable because of their high initial cost and current ability to heat a home.

However, what is not in doubt is that new build house builders cannot bury their head in the sand, as the first raft of changes of increased efficiency standards will apply by the end of next year. These will have cost implications for house builders and SME developers need to be aware.

Changes are coming and some will be painful but ultimately we all have to up our game to protect our planet.

 

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.