Empty property loan
Cornwall Council offers short term, low interest loans for properties that have been empty/unused for at least six months. Loans are used to facilitate repairs/renovation/conversion of properties to a habitable standard in compliance with decent home standards and the Cornwall Rental Standard.
Loans up to £60,000 are available for single dwellings and up to £210,000 where a project involves multiple units of accommodation. Properties that can potentially benefit include existing single dwellings, single dwellings being sub-divided to create additional units of accommodation, non-residential buildings which have achieved planning permission for the creation of residential units, and unused spaces in buildings such as above commercial premises. The more units of accommodation refurbished/created the greater the loan amount available.
Loans are secured by way of first or second legal charges on the empty/unused properties, or other properties which have sufficient equity. There are no monthly repayments to make and loans are repaid in full on the sale of properties or within 3 months of the completion of works if owners are retaining ownership.
Types of projects that the empty property loan could support
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A property may have been purchased with the intention of undertaking refurbishment/conversion works then selling or renting out. However personal circumstances have now changed and the owner cannot secure finance as they are not able to demonstrate how they can make the monthly repayments associated with traditional loans.
The Cornwall Council empty property loan is repaid in one lump sum on the sale of the property or within 3 months of completion of works and therefore there are no monthly repayments to make. As long as there is sufficient equity in the property offered as security then it is likely that a loan application will be successful.
A property has been on the market for sale for some time with little or no interest. Feedback from Estate Agents is that potential buyers are being discouraged by the condition of the property.
An empty property loan can be used to undertaken any works within the boundary of a property, including landscaping. Not only can it be used for general repair/renovation works, it can also be used to fit new bathrooms and kitchens, general decorating, and improving the external appearance of a property such as replacing windows. In this situation the aim of using the loan is to increase the chances of achieving a sale. The loan is repaid on sale of the property.
The owner of a property has an existing mortgage/finance secured against a property which has now fallen into disrepair and there is little or no equity. In this situation the property could not be offered as security for the empty property loan as there has to be sufficient existing equity. However the owner of the property also owns other property in Cornwall, with sufficient equity, which could be offered as security. The Council would secure a legal charge on the property and the loan would be repaid on the sale or refinancing of the empty property.
A recent example of this would be a large property in Newquay, formerly a house in multiple occupation, which was in a small amount of negative equity. The owner had been marketing the property for sale without success. The owner lived in a property with a substantial amount of equity. The owner obtained planning permission to convert the empty property into 5 self-contained flats, and the Council secured a legal charge on the owner’s own home. The conversion was successfully undertaken using the empty property loan and as a result the empty property value increased and there was sufficient equity for the owner to obtain finance and repay the loan within 3 months of completion of works. On repayment of the loan the Council removed its charge from the owner’s home.
Owners of large empty/unused properties creating a number of units of accommodation have the potential to access larger loan amounts. There is no restriction on the type of property that can be assisted if owners have relevant full residential planning permission.
Some examples would be former office space, empty/unused space above shops, pubs, and former nursing homes. On completion of works owners can either repay loans within 3 months or sell enough units of accommodation. So, for example, if converting to 7 units then an owner could either refinance to retain ownership of all the properties or sell enough units to facilitate repayment of the loan whilst retaining the remainder.
Sometimes properties are purchased or inherited and for a variety of reasons they are in a condition where it is not possible to secure a mortgage to raise funds to facilitate refurbishment works. In these cases it may still be possible to secure an empty property loan.
An example would be when a property may be suffering from mundic decay and the loan could be used to undertake the necessary remedial works so that the property becomes mortgageable. Another example would be when empty property loans have been used to bring properties of a Cornish unit construction back up to a mortgageable and habitable standards. This type of loan is sometimes referred to in the finance industry as a bridging loan.