Mortgages.scot

Live-work units may not be something you know about, many stumble across them rather than go looking. Those that do find it problematic obtaining a mortgage for one. Lenders have a limited appetite and we will take a look at why in this article.

What are live-work units?

As the name suggests, live-work units are a space where you both live and work. Not only is the dual purpose an advantage for some it is a requirement you do both. That is, you must run a business and live in the property. You cannot do one or the other.

The lease will stipulate that you must do both and failure to do both can result in the lease being terminated and you lose the property. I am aware of at least one case where a lease was terminated as the property was being used for residential purposes only.

Another important element is planning. Buildings that have been designated work-live can become the focus of the local authority if the property is not being used as intended.

Where does the idea come from?

As we progress there is less need for industrial spaces but there is a lot of land used for industrial purposes Stood empty. Often the solution was to regenerate the area. The most common option was to build residential housing.

The idea was therefore to support new ways of both living and working by regenerating unused or at least underused industrial sites whilst keeping a focus on maintaining an element of industry/business. The London Borough of Hackey was one of the first in the UK to look at the idea. Today they have hundreds of properties used this way.

Who would use live-work units?

Today there are more small businesses than ever. Many need space but don’t necessarily need it to be that big or specific such as a shop on a high street or an office. Cost is a factor also, small businesses can need office space but having the cost of a home and a shop or office may be prohibitive. Common businesses that are run from this type of property include:

• Photographers
• Solicitors and Accountants
• Web/Software developers
• Consultants
• Any many others.

Why not just use a normal house instead?

In some cases, you can. But the idea of live-work units is that there is separation. The living area is specifically designed and laid out for that purpose. Whilst the work area is also designed and laid out for the purpose of working.

It may be that your work requires people coming to you, so rather than a living room at home type of atmosphere which is not so professional for some businesses, you have a very clear ‘this is my office’ area that is more appropriate and professional.

Also remember that running some businesses from home is against local authority regulations, in some cases also against your mortgage lenders terms or the terms of your lease.

Having regular visits from customers may also annoy your neighbours which can lead to complaints.

Sure, there are some that will be fine and it may be more appropriate, that is for you to decide.

Are live-work units cheaper?

It depends on what you are comparing it against but usually, they are cheaper than an equivalent property used only for residential purposes. And almost always cheaper than having both a home and an office in terms of costs.

It should also be noted that council tax and business rates will be paid. That is council tax on the live area and business rates on the work area. You need to understand what the costs will be for the unit you may be interested in. In any event, they should not be a deal-breaker amount.

Something worth considering is that depending on the property type, say a block with 30 units. That means you are in effect sharing a building with not just 29 other people but 29 other businesses.

That could mean a lot of traffic coming and going, more noise as well. The living at your office part of the arrangement could soon become a downside.

Have a look at this site which gives you a look at what is available: http://www.londonlivework.co.uk/

What about a mortgage?

There are lenders who will consider live-work units, not that many though. Why?

For most the issue is the restricted market for them. The only buyers must be purchasing for the same reason you purchased. To live and work there. Whilst there are many who would be interested, it is not enough for most lenders.

They are concerned that the restricted market will make it difficult to sell and there is the issue where a change in demand in an already restricted market will make selling even more difficult.

That is turn could lead to lower values, potentially result in a negative equity position and ultimately these are not positions lenders want to be in.

So if you are interested in this type of living, consider who is lending at the same time. In any event, affordability requirements will be the same.