Our guide tells you all about what makes these properties distinct. Uncover the challenges and rewards, highlighting how their purchase process differs from buying a house.
Why buying a flat above a commercial premise is tempting
The allure of urban convenience and price benefits
Buying a flat above a shop often comes with a price tag that appeals to many prospective homeowners. Flats in such locations frequently offer a lower entry point in comparison to other residential properties in the same area.
This pricing advantage, combined with the opportunity to reside in the heart of bustling urban centres, makes these flats an attractive choice.
The convenience of having daily essentials right downstairs can't be understated. Whether it's grabbing a loaf of bread from the ground floor bakery or benefiting from extended shop opening hours for that last-minute shopping, the perks are many.
Living in such flats situates you amidst a hub of local amenities. With shops literally on your doorstep, grabbing daily essentials becomes a task of sheer convenience. You might find yourself less reliant on having to drive to larger supermarkets or stores.
Proximity to work and vibrant city life
Flats above shops are predominantly located in urban areas, often reducing the commute for those working in city centres.
From theatres and art galleries to a myriad of cafes and restaurants, city life brims with activity.
For young professionals or first-time buyers, these flats can be the ideal introduction to a bustling community and networking opportunities.
The appeal of ditching long train rides or traffic jams and instead enjoying a short walk to work is a strong draw for many.
Financial implications of buying a flat above a shop
Mortgage challenges: why some lenders hesitate
Commercial properties pose a distinctive set of considerations for mortgage lenders. For a residential property like a flat share building with commercial shops, the risks associated with lending can shift.
Flats above shops require a more thorough evaluation.
Mortgage lenders categorise the whole building as a commercial property when a flat is situated above a shop. This categorisation can present challenges during the mortgage application.
Flats above establishments like dry cleaners or late-night eateries might be deemed less desirable due to potential health concerns or late-night noise.
Such circumstances lead fewer lenders to offer mortgages for these properties. Use a mortgage consultant to learn about insurance premiums.
Potential lenders usually consider these on a case by case basis, with many requiring a larger deposit as a risk offset. Here's a more detailed article on how to save for a house deposit.
Securing the best mortgage deal with specialist lenders
Not every mortgage lender might shy away from a leasehold flat above a commercial premises. Specialist brokers exist that have ties with lenders more amenable to such property types. They can assist prospective buyers in understanding their options and sourcing the best deal.
Engaging with a mortgage broker can simplify the process of securing a mortgage on a flat situated above a shop. A specialist broker can provide a no-obligation chat, offering insights into lenders who might accept applications for flats in commercial buildings.
They are adept at handling nuances, from understanding the distinction between self-contained flats and those that share entryways with businesses, to the implications of service charges and roof works.
By consulting a broker, buyers can ensure they're better positioned to negotiate mortgage repayments that suit their financial needs.
The pros and cons
Benefits: bigger rooms, local amenities, and potential investment
Commercial properties, especially shops, often have more generous floor spaces compared to residential buildings. As a result, flats situated above them frequently offer larger rooms, granting residents more living space.
For those eyeing an investment angle, these flats can yield rental income if the ground floor shop is part of the property.
Risks: unsociable hours, security problems, and resale value
Residing above a shop isn't without its challenges. Shops tend to operate at unsocial hours, especially if they're convenience stores or establishments open late into the night.
This could result in noise during early mornings or later evenings, which might not align with your own schedule.
The frequent coming and going of customers, especially during the night, can pose potential security risks. For example, having a dark alleyway beside or behind the property might attract unwanted attention.
When considering resale, you might face hurdles. Some potential buyers might be put off by the idea of living above a business, and some mortgage lenders might not be as willing to lend for these properties, limiting your pool of potential purchasers.
Factors that lenders consider
Mortgage lenders look at several factors when deciding whether to lend on a flat above a shop. Often, the nature of the business operating below plays a role. For instance, if the shop engages in activities that might pose a risk to the flat above, such as a fast-food takeaway with a higher fire hazard, lenders might be more hesitant.
The structural integrity of the property is another consideration. Some lenders might deem flats above shops as riskier, given they're part of mixed-use properties. This could lead to a requirement for a larger deposit from prospective buyers.
Moreover, flats that are at least one floor removed from the shop tend to be more favourably viewed than those directly above commercial premises.
Estate agents and selling
When the time comes to sell your flat, estate agents will likely highlight the benefits, such as the larger room sizes and the convenience of amenities. However, a subset of potential buyers might be deterred by the idea of living above a business.
Since some mortgage lenders are less willing to lend on such properties, you might encounter a smaller pool of interested parties.
Be transparent about any challenges, such as noise or security concerns, to potential buyers.
By addressing these issues head-on, and perhaps even offering solutions or modifications made to counteract them, you can make the property more attractive.
Legal considerations for flats above shops
Flats above shops, unlike normal flats, come with unique legal facets. The intertwining of residential and commercial spaces introduces complexities that potential buyers must address.
The lease of the shop and its implications
Commercial premises often operate on leases, determining shop owners' tenure. When purchasing a flat above a shop, you should review the shop's lease terms. Lease durations, rent reviews, and renewal rights can all impact your living conditions.
Any breaches of the shop lease could have repercussions for flat owners, particularly if the breach results in legal actions or eviction.
Relationship dynamics between flat owners and shop owners
Establishing a harmonious relationship with the shop owner aids a smooth coexistence. Both parties share the same building, and disputes can strain daily living.
Ownership of the property's shared areas, such as hallways or staircases, might be divided equally between the shop owner and the flat owner. This arrangement necessitates joint decision-making regarding maintenance, repairs, and security measures.
Ensure clarity about each party's responsibilities and rights to prevent disputes.
Parking and transportation
Securing a parking spot in bustling urban areas can be a challenge, more so if you own a flat above a busy shop.
Parking space challenges and solutions
Many commercial properties lack dedicated parking for the flats above. Street parking becomes the default option, but it's not always available. While public transport is an option, if you own a vehicle, you must consider the availability of parking spaces before committing to a property purchase.
Considering own parking space and local leisure facilities
Investigating nearby parking facilities, whether public car parks or private spaces for rent, can save you a lot of hassle.
Some flats above shops might come with a parking space included in the purchase or available for an additional fee.
Weigh these options against local public transport services to determine the best fit for your transportation needs.