When it comes to choosing homes, I find that the British are a fairly conservative bunch, happy to live in a brick and tile construction, probably under 75 years old.
However there are a few adventurous or possibly romantic types who break the mould and go for properties with history or character.
As a mortgage intermediary, should the fact that a great many of these will be listed buildings mean they are difficult to place? The answer is hopefully no.
The concept of listing
The concept of listed buildings was introduced during World War II, as a way of determining which buildings should be rebuilt if they were damaged by bombing. Shortly after the war, the Town and Country Planning Act of 1947 led to the compilation of the first list of buildings of special historical or architectural importance.
- There are around 370,000 listed buildings in the UK, the following are typical examples:
- All buildings that survive in their original condition from before 1700.
- Most buildings built between 1700 and 1840.
- Specific buildings of importance built between 1840 and 1914.
- Outstanding buildings built since 1914, or which are under threat.
An archive of photos of buildings that were on the statutory list in 2001 is available from http://www.imagesofengland.org.uk.
Buildings can be listed, by English Heritage, in three grades: Grade I, Grade II* and II.
- Grade I – about 2 per cent of buildings are listed Grade I, being of exceptional interest.
- Grade II* – another 4 per cent are Grade II*, important buildings of more than special interest.
- Grade II – the remaining 94 per cent of buildings are listed Grade II.
Underwriting
The vast majority of listed buildings present no great underwriting issues, provided that they have been maintained to a reasonable standard and meet all the usual criteria for underwriting.
Issues can arise, however, where a borrower wishes to borrow money against a more unusual property. The definition of ‘unusual’ is as wide as you would wish it to be, but is probably best encompassed as being a property which is either Grade I or Grade II* listed, one which is of an unusual property construction or which may have other reasons which would restrict its resale value or the time it might take to achieve a sale.
As with all mortgages, the underwriter assessing an application for mortgage finance on a listed building will need to assess the potential resale value of a property and the market to which it could appeal.
While a Grade II listed building, comprising a considerable proportion of the UK’s housing stock, will probably sell in a reasonable timescale and without any great issues, finding a buyer for a Grade I or Grade II* property may not be so easy, given that such a property is more likely to be of high value or unusual character and so the market to which it will appeal will be limited.
An underwriter who is considering whether to advance a mortgage against such a building will need to be confident that in average market conditions, it would be reasonably easy for his company to re-sell the property should it ever have to be repossessed. If a property has stringent rules for how it can be adapted or even maintained, this will have a knock-on effect on saleability of this property, especially in a subdued housing market.
In a similar way, unusual property construction may also affect the saleability of a property. A Grade II Martello Tower is a wonderful building but the upkeep costs, structure, location and numbers of steps within the property will mean that it will not appeal to many ‘ordinary’ home buyers, thus limiting the pool of potential purchasers.
A converted windmill or even a cob cottage with a thatched roof will have specific maintenance requirements, which will put off some borrowers from considering that type of property. An underwriter must ensure that even if a property is listed, there are no factors that could jeopardise saleability.
A particular example for this would be the provision of a mortgage on a converted church. Specialist lenders will often agree a mortgage on such a property, provided that it does not have a graveyard included in the title, as this can discourage purchasers.
Insurance and saleability
Another factor that an underwriter will need to assess is whether the property can be insured easily. A standard domestic property insurance policy is unlikely to be acceptable for more unusual property types and the mortgage applicant may need to work with his intermediary to source suitable cover.
He may also need to provide to the underwriter proof of the policy that he plans to take out to cover the listed building, so that the underwriter can assess whether this is adequate.
Listed buildings are subject to stringent controls on the types of work that can be carried out on them. Routine tasks such as installing a burglar alarm, changing the windows or doors or putting up a satellite dish may require listed buildings consent.
As well as affecting the saleability of a property, these controls can also impact on its current valuation. If a property has had the windows changed without listed buildings consent being granted, the planning officer at the local authority has the power to require the current owner to return the building to its former state – even if the current owner was not the person who made the changes.
Changes made to a listed building without the appropriate consents being in place can entail considerable expenditure, just to put the building back to its former state, without actually ‘improving’ it in any way.
An underwriter presented with an application for a listed building will pay particular attention to the valuer’s report to check that no glaringly obvious alterations have been made to the building and that the quality of any renovations made is good. The underwriter may also include a condition in any mortgage offer made that the borrower’s solicitor must confirm that all necessary listed building consents are in place.
Fairly straightforward
In general, listed buildings are fairly straightforward to place for mortgage business and many will be able to be underwritten on a standard basis. Issues are more likely to arise where a property is listed as a Grade I or Grade II* property, is of unusual construction or where unapproved work has been carried out on a listed building.
As ever, the main issue with which an underwriter will concern himself is the likely saleability of a property should the need ever arise to repossess it. Consequently the underwriter will need to feel reassured that there is an ongoing market for this type of property and at a reasonable price. Provided that the underwriter can feel reassured that this is the case, a mortgage offer should not be difficult to source.
