September2022 Challenges facing commercial financein2022 Help to build scheme Build Warranty? Buying land at auction Is it right for you? Do you need one? Advice from the www.thelandsite.co.ukexpertsThe magazine for the real estate industry, packed full of real insight. Follow us Visit us: Brought to you by The Landsite
About Rolfe East Commercial Rolfe East not only specialise in Residential property but Commercial property too. We apply a fresh style to the market and use the same proven residential strategy with our professional commercial service, where our proactive Commercial Team will advise on all aspects, including; • The latest local market update in Commercial property availability • Investment opportunities, change of use and buying off plan • Legal aspects of Commercial property purchase, including short leases • The different legal considerations when comparing Commercial and Residential property Address: The Courtyard, 18-19 The Mall, London W5 2PJ Phone: 0208 567 2242 Website: rolfe-east.com Large enough to produce great results, small enough to care Our local expertise and liveliness is second to none Opened since 1983, with an average of 15 and a half years experience between our team!
September 2022 TLS Insights from the CEO | 5 Welcome! We are delighted to bring you the very first edition of TLS Insights The Landsite team have worked tirelessly to get this publication off the ground. With our growth at 300% over last year it seemed the natural step to launch our TLS Insights magazine. We are not a news publication - there are plenty of those around. TLS Insights is an extension of our ethos and designed to support our member businesses and professionals as well as bring you a round-up of interesting and relevant features for anyone with an eye on the property market. In this first edition we cover the government’s Help to Build scheme for new homes which is well worth a read for property developers, aspiring home owners and builders. Elsewhere in this issue we discuss the concept of hybrid working design and the benefits of online auctions. As part of our main feature on the challenges facing the commercial property market, we contacted some of our leading finance specialists and found out what they have to say. In the coming months we will add to leading articles with a series of interviews with business leaders along with Q & A sessions with our members. We will continue championing our members businesses, regardless of whether they are individual professionals, SME’s or larger businesses. We hope that you enjoy this first edition!
Ramsey Assal CEO at The Landsite Davis as
CEO & Publisher Ramsey Assal Sales Director James
possible. Neither the publishers nor their agents can be held responsible for any errors or omissions; nor shall they be liable for any loss or damage to any person acting on the information contained in the magazine. Copyright © 2022 For advertising and editorial content emailContentswww.thelandsite.co.ukinfo@thelandsite.co.uk Architecture & design 6 Finance 8 New homes 10 Property trends 13 Property investment 17 Insurance 21 Auctions 26 Follow us
Marketing Director Tracey Turner Client Services Manager Gail Wheeler Business Development Manager Jamie Smith Design and production lucas-studio.co.uk The Landsite and TLS Insights are registered trademarks of The Landsite Online Ltd registered in England and Wales. Company registration number: 11627385 Registered office: 2 Blagrave Street, Reading, Berkshire RG1 1AZ Nothing in this publication may be reproduced without the written permission of the publishers. Readers intending to purchase goods or services from advertisers should make their own enquiries if in any doubt. Every endeavour has been made to ensure that all the information published in this magazine is as accurate
Thesecompanies.companies recognise that commercial and personal success is driven by their employees’ happiness and by promoting a productive environment in the workplace and their employees’ homes.
TLS Insights www.thelandsite.co.uk 6 | architecture & design
Adopting mindful design concepts Global Management Consultants McKinsey & Company estimate that 20 to 25 percent of the workforce could work from home three to five days per week without any productivity loss. However, while having staff work from home full-time is not feasible for many businesses, flexibility is. The hybrid working approach, where staff work from home for part of the working week, is proving a success for many
• Creating a comfortable, safe space for anyone with underlying health concerns and staff still concerned about the risks of catching Covid-19.
• Sufficient exposure to daylight at home desks or effective indoor lighting solutions. Since lighting plays a massive role in our moods, if possible, the position of desks should maximise natural light.
While a hybrid working approach will vary for every business, promoting a sense of wellbeing in the workplace, be that onsite or at home, will be essential for long-term success. |
The majority of WFH surveys have concluded that many people are generally happier working from home because it allows for more flexibility. A hybrid work approach appears to suit both employer and the employee – however, is this feasible long term? The hybrid working approach, where staff work from home for part of the working week, is proving a success for companiesmany
is coming to an end, school life resumes once more, and work continues in earnest for the final quarter of 2022. Since March 2020, the number of employees working from home (WFH) has substantially increased. However, with advice from the government constantly changing, will the numbers of remote workers begin to decrease as we enter the final quarter of 2022? And if not, what changes do businesses have to adopt to encourage their staff back into the workplace?
Adopting mindful design concepts at home and in the workplace is a driving factor for businesses successfully adopting the hybrid workingEmployersapproach.looking to encourage employees back to the office could consider changes such as:
• Providing access to green spaces and creating community gardens for winter and summer for employees to enjoy will contribute to a sense of wellbeing at work. Outdoor spaces aren’t possible or practical for all commercial properties, but there are ways designers can bring the outside in with living walls and indoor plants.
Summer
Creating a WFH lifestyle balance And to promote productivity amongst WFH staff, offer support and advice on creating mindful work environments at home, encouraging:
• Bringing the outside in with furniture, textiles and décor that mimic naturally occurring textures. Wooden desks, natural fibre rugs and wicker are all ways of creating a natural environment indoors.
• Adopting simple Feng Shui practices at home, like de-cluttering rooms and walkways to allow energy to flow. There are hundreds of small and easy steps you can take to enhance wellbeing for a positive work/life balance at home.
• Encouraging a sense of community spirit through re-design, such as creating office break-out areas, shared kitchens or open plan work areas to promote team building.
Employees favour hybrid work approach
Lally Walford Interiors offers a comprehensive interior design service, tailor-made to meet your specific requirements. 4 Old Tolbooth Wynd, Edinburgh, EH8 8EQ. 07794 542 298 www.lallywalford.co.uk @lallywalfordinteriors
And the changing nature of the high street is increasing demand for property conversions from commercial to residential and vice versa.
A positive economic backdrop at the start of 2022 was a good sign that the commercial property sector was looking at a strong recovery following a tumultuous two years. But it still isn’t without its challenges; with UK inflation reaching a new 40-year high and the cost of living crisis – what is the impact on commercial property finance
W
Challenges of commercial property finance in 2022
TLS Insights www.thelandsite.co.uk 8 | finance
e asked some of The Landsite members and industry experts what challenges they think businesses are facing.
Rising costs vs demand
According to Pete Davies, Head of Lending – Salboy Build Partner, “The construction industry is facing a number of pressures from cost inflation and changes effecting supply changes impacting labour. It’s more important than ever to have the correct back and support in place to access what’s required to deliver new build schemes. Despite these challenges, the property market remains buoyant and stable despite an unprecedented level of changes over the last 2 years. So if you can build homes, people still want to live in them.”
Lender concerns over affordability present a serious challenge, but while interest rate rises are a concern, borrowers and lenders are seemingly taking this into account. Plus, the undersupply of UK housing and the evening out of construction costs means that the industry expects to see more, not fewer, property developments.
The most significant challenge for the whole economy in 2022 is spiralling inflation, and the rising cost of living will impact all businesses as consumers tighten their belts on discretionary spend in order to meet their commitments. However, experienced lenders will not use this as an excuse to reject applications, but instead, work with clients to identify the most suitable finance solutions to meet their requirements.”
The ongoing effects of Covid-19 The past two years have radically changed how we work and live. Businesses are investing in higher quality commercial properties to suit hybrid working, where office spaces are now more about collaboration and interaction. Sustainable and tech-enabled buildings are becoming standard requirements. E-shopping has given rise to the need for vast networks of storage spaces in strategic locations – repurposing old buildings and warehouses.
Jonathan Rubins – Director, Alternative Bridging Corporation.
While the outlook for the economy is uncertain, the demand for commercial property finance has not decreased. The evidence suggests that it is an exciting time for commercial landlords and property developers with their finger on the pulse.
The past two years have radically changed how we work and live. Businesses are investing in higher quality
This is supported by BloomSmith who state that “The hangover is in pubs, clubs, restaurants, offices and retail. The demand pressure is for residential supply and distribution. This is creating transactional volume and sellers want fast, certain money. Ironically, BloomSmith is seeing most of its more recent referrals coming from those sellers, (not directly from the buyers or buyers brokers), who recognise the value of us providing 20% of the cash required to help complete their deals, fast and with certainty.”
Currently, the biggest challenge seems to be not whether property finance can be acquired but how quickly and at what cost.
Tougher credit conditions make have dampened momentum in investor activity, but the challenges faced could be alleviated by lenders. With current market conditions impacting developers’ ability to complete projects on time and on budget, the support of lenders that recognise the need for speed and flexibility will be essential. Particularly given the varied scope and complexity required for commercial property finance, lenders need to be looking at offering creative, customised solutions to support developers.
“Flexibility from lenders is going to become so, so important in the months to come. In the current climate, using rigid tick-box methodologies will fail to serve the needs of property buyers. Rather, lenders must demonstrate a little more creativity in how they assess loan applications; they must endeavour to tailor their products and services to the needs of the individual borrower; and ensure they take a view of the bigger picture as far as affordability checks are concerned. Due diligence and rigour will, of course, be vital, but there is still room to adapt process and keep lending.” Market Finance Solutions. |
RICS economist Tarrant Parsons said, “Given interest rates are set to rise further from here, it appears the market may be at a turning point.”
A recent Royal Institution of Chartered Surveyors (RICS) survey said that 43% of its quarterly commercial property survey respondents thought the sector was in the early stages of a downturn. A further 10% thought it was in the middle of one. By contrast, three months ago, 53% said the sector was in the early or middle stages of an upturn, a proportion that has now slumped to 22%.
Paul McGonigle, CEO of Positive Lending comments “the biggest obstacle facing the sector at the moment is not the availability of finance but the speed and cost in which it can be acquired. The continuous increases in base rate to try and control an inflationary recession has created panic. Consumers are running to lenders and brokers trying to secure finance as costs increase, which is now creating huge backlogs of applications for lenders to process, surveyors to visit and brokers to work through. Lenders are being forced to increase their rates and the deadlines set to capture the original rate are almost impossible to obtain due to the timescales in processing the cases. The products are almost unobtainable from the moment the clock starts ticking for offer deadlines. Until the market steadies I do not see a change in this behaviour, which I would anticipate to continue until Spring 2023.”
propertiescommercialtosuithybridworking,whereofficespacesarenowmoreaboutcollaborationandinteraction
September 2022 TLS Insights finance | 9
Support for property developers
I
TLS Insights www.thelandsite.co.uk 10 | new homes
You only start to pay fees on your equity loan after you have completed your build. No interest is charged on the equity loan for the first five years. You start to pay interest from year six until the equity loan is paid back in full.
Are you eligible?
• Will live in the newly built home as your only home
According to the National Custom and Self Build Association (NaCSBA) approximately 13,000 self build homes were constructed in 2021. It’s expected that the introduction of the Help to Build scheme could increase this to 30-40,000 new homes each year
Help to Build is a four-year scheme, ending in 2026, that utilises a £150 million fund from the government that allows for low-deposit mortgages through equity loans on self and custom build homes.
When you repay the equity loan, the amount you need to repay is worked out using the market value of the home, including the value of the land. If the market value of your home increases so does the amount you have to repay on your equity loan.
• Upon being offered the equity loan, you have three years to buy the land and build your home
f you’ve ever thought about building your own home, now might be the time to make it happen. According to Housing Minister Stuart Andrew, the government’s new Help to Build equity loan scheme will “break down barriers to homeownership”, as it makes the option to self-build more affordable and accessible to people. Aspiring home builders will be able to finance their custom or self build with just a 5% deposit.
If you are:
• You can spend up to £600,000 on your new home –including the land cost and no more than £400,000 to build it.
How does Help to Build work?
What about the repayments?
• Can secure a self build mortgage with a lender registered with Help to Build. You can apply for a Help to Build equity loan
•
Help to Build makes custom or self build an option for people with smaller budgets and, importantly, smaller savings. |
• You can borrow an equity loan of between 5% and 20% (up to 40% in London) of the total estimated cost to buy the land and build your new home, but lenders will accept a minimum deposit of just 5% towards the mortgage
• Once your home is built, the government pays your mortgage lender the equity loan amount, and your self build mortgage will switch to a repayment mortgage.
What’s the Help to Build Scheme?
• Have a right to live in England
Over 18
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property trends | 13 UK residential property trends August 2022 Whilst the market is still buoyant and positive in comparison with the wider economy, August’s figures have shown a levelling off in terms of sales agreed and new instructions. The latest house price index from Halifax shows property prices have fallen slightly for the first time since June 2021. Property supply has continued to increase in every UK region except inner London. The intensity of demand is beginning to wane, and this is backed up by the slight changes we’ve seen across sales agreed and completions. As supply slowly increases, and economic conditions worsen, it’s no wonder there’s a hint of a change in the energy of the property market as we head towards Autumn. Currently, there are 227,949 residential properties available for sale and 340,236 properties with sales agreed across the country. There have also been 291,214 completions in the last three TwentyCimonths.isaninformation and marketing services company that provides UK residential property data, analytics & insight for marketing and other key strategic purposes. Our experience and client portfolio encompasses multiple sectors and categories, including property and estate agency groups, retailers, financial services, automotive and utilities. The current level of houses for sale East Midlands 16,103 East of England 23,654 Inner London 26,860 North East 8,405 North West 23,274 Northern Ireland 4,745 Outer London 12,729 Scotland 10,399 South East 38,199 South West 20,569 Wales 10,879 West Midlands 15,981 Yorkshire and The Humber 16,152 August 2022 Source: TwentyCi Data September 2022 TLS Insights
Commercial or Domestic we have a rainwater system to suit your plans and your budget For more information please call 0113 279 5854 or email info@rainguard.co.uk Traditional and modern gutters, pipes and hoppers come in a comprehensive range of aesthetic styles, materials and colours to suit all buildings and budgets. www.rainguard.co.uk SL ALUMINIUM XL ALUMINIUM XL ALUMINIUM GRP CAST IRON Squareline ALUMINIUM FASCIA & SOFFITS SL ALUMINIUM
September 2022 TLS Insights partner message | 15
Positioned in-situ using concrete foundations. Cross-section reinforcements can be freely parametrised according to structural engineering requirements. Structurally designed up to 3 metres in height. Reuse of standard building blocks simplifies the load calculations process. The foundation connections are dependent on the structural requirements and local ground conditions. The footing options available are L-shaped hill and valley side. T-shaped and T-shaped freestanding. The process can be used to create several different kinds of elements: retaining walls, privacy screening, raised flower beds or the walls for pools and ponds. The benefit of speed of construction and accuracy is important if you have a large quantity of unstable soil waiting for the next storm to wash it away. Finishes There are a wide range of finishes to match project requirements. A simple natural or textured concrete is available to create a modern contemporary look. For those who seek a natural wall there is a comprehensive range of stone which can survive adverse weather conditions and materials such as winter salt. Stones are set on the wall and pointing is available depending on the stone type. It is even possible to include mosaics like house number, lettering, or company logo as part of your design. Details Keller PO Box 631, Addlestone, Surrey KT15 9BG info@glatthaar.co.uk | phone +44 (0)1932 344454 www.glatthaar.co.uk basement manufacturer
Glatthaar Keller UK identified the need to include landscaping elements as part of a basement or ground bearing slab project. Several clients wanted to utilise the prefabrication process to create elements within their garden. Starwalls is a product being offered in Germany where there is a well-established demand. Its success revolves around the creation of prefabricated components to a very high specification within a controlled manufacturing process. Sections are delivered to site where they are then fixed to the foundations ready for backfill, speeding up the construction process and creating a consistent quality.
G latthaar Keller Starwalls evolved from their infrastructure division where they build retaining walls for civil engineering projects. The same process is used to create smaller scale elements that can be used on self-build or landscaping projects. A typical project would involve excavating the site and creating the footings, which is a similar process to a slab foundation. Then the prefabricated sections are created in the factory where the stone finish is applied along with pointing. It is a lot easier to attach the stone in the factory horizontally rather than vertically at site.
Leading German
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Glatthaar Keller introduce Glatthaar Starwalls to the UK market Prefabricated retaining walls with foundations
Design Options
Glatthaar
Protek’s breadth of experience across the homebuilding and construction sectors enables us to deliver warranty solutions that focus on service, cost and your end customer’s satisfaction. Register free online today Visit protekwarranty.co.uk or call 0333 456 5040 SELFCOMMERCIALRSLREGENERATIONNEWWARRANTYSTRUCTURALPROTEKHOMEBUILD Protek Group Limited is an appointed representative of Steve Wassell Insurance Management Limited who is authorised and regulated by The Financial Conduct Authority (Firm reference number 231905)
Property investment opportunities
Buy-to-let A residential buy-to-let property is seen by many as a reliable investment. For now, affordability and availability continue to be deciding factors for many opting to rent rather than buy their home. This has pushed up landlord’s yields considerably in the past 18 months. According to the Office of National Statistics (ONS) average private rental prices paid by tenants in the UK rose by 3.2% in the 12 months to July 2022, up from 3.0% in the 12 months to June 2022. It is therefore, of little surprise that a recent survey conducted by insight business consultancy BVA BDRC, showed that 15% of 700 landlords surveyed are considering to buy more buy-to-let properties in the next 12 months seeing it as a sound investment. It suggests that over half of property investors who are reviewing their growth strategies are planning to invest through a limitedHowever,company.landlords cannot rest on their laurels, with increasing cost increase pressure from a variety of fronts. The most recent discussions surround energy performance as properties need to comply with an ever increasing number of energy performance amendments in order to be ready to enter the rental market. For instance, in 2020 the UK Energy White Paper was released, laying out regulations which explicitly require all rented nondomestic buildings to achieve an Energy Performance Certificate rating of B by 2030. This has been driven in a large part to a response to the current climate crisis and will not only affect new buildings and lets, but also applies to existing ones. Furthermore, from 1 April 2023, a landlord cannot continue with a current let if their property has an EPC rating of lower than E. Since covid, tenants are proving to be more discerning in their hunt for a place to live. To deliver on their aspirations landlords need to factor in maintenance and upkeep costs and as has been widely broadcast across the construction industry, building work has come under immense pressure by limited labour supply and the rising costs of materials. By the end of September 2021, for instance, steel prices had increased over 70% year on year, according to the ONS. Commercial property
There is an unease that the high street will become an echoing world of empty shops and commercial premises, according to the RICS who report concerns that many built assets could become stranded through lack of demand. However, a recent report by Deloitte offers optimism, believing that the high street is ideally placed to reinvent itself in response to the structural shift in working and shopping patterns that has resulted from the COVID-19 pandemic. The retail sector has been in decline since the crash of 2008 and the emergence on online retailing. The report suggests that since 2010, nearly1,400 retailers entered administration struggling with the impact of the internet. The decline is continuing and more shops have been closing than opening, with a further 30,000 net physical store closures projected between late 2020 through to the end of 2022. On a positive note Deloitte adds, while all retail locations are struggling with growing vacancy rates, the high street has shown remarkable resilience with the current vacancy rate of 12.5%, broadly the same as in 2013. This suggests that new openings must have been largely keeping pace with closures and supports the view that while the high street struggles, it is also capable of constant reinvention.
September 2022 TLS Insights property investment | 17
Thankfully there are investors and developers out there taking note and working with local councils and The ultimate aim of property investment is to generate an income, and therefore a return on investment (ROI). This ROI is usually from landlords creating a stream of regular rental payments or by selling it once it has grown in value
There is an unease that the high street will become an echoing world of empty shops andpremisescommercial
|
TLS Insights www.thelandsite.co.uk 18 | property investment stakeholders to create new schemes to bring life back into the towns. Town centres are being rejuvenated to create local communities around shopping centres. This opens up opportunity for buy-to-let investors, while also creating the much needed trade for localised commercial premises as residential communities support local retailers. Yet still some commercial property investors remain cautious of the high street, and there is a trend and indeed huge potential for investment out of town. Online retailers and service providers still need premises, and hence there is buoyant market for investment within the industrial sector. For instance, a dramatic surge in the use of digital services over the past two years means that the demand for logistic centres, warehousing and data centres is huge, creating opportunities for investment in industrial estates. It’s a trend that has been observed by Jamie Pritchard, Director of Sales at Glenhawk, which offers short term property finance solutions. “Industrial has continued to thrive post pandemic, driven by both strong rental growth and an increase in demand. Industrial covers a multitude of building types from flex buildings (office space and storage) to large logistic sites. Similar to warehousing, the pandemic changed how the consumer operates and the diversion from people able to purchase from the high street to online increased the demand on business able to flex to the new habits – all of this resulting in both industrial and warehousing being a more favourable commercial asset class for investors,” he says. There is huge demand for property investors right now, whether within the buyto-let market or within industrial space. As long as due diligence is undertaken before committing to any financial obligation, property continues to be projected as a sound long term investment.
stated
UKsancus.com|IRELAND|JERSEY |
GUERNSEY | GIBRALTAR criteria only, each loan application is considered on its merits. Risk Warning: If you are co-funding you could lose part or all of your capital. Indicated returns, unless otherwise stated are shown before any provision for bad debts and may be subject to tax. Sancus do not provide private mortgages. Sancus Lending (UK) Ltd is authorised and regulated by the FCA (firm reference number 593992) and is incorporated under the laws of England and Wales, company number 07534003, registered office: 3rd Floor, The News Building, 3 London Bridge Street, London, SE1 9SG. Part of Sancus Group Holdings company no 57766 registered office Block C, Hirzel Court, Hirzel Street, St Peter Port, Guernsey GY1 2NL.
LTV/LTC 75%/85% | 6 to 24 months
> Ground
Development by Sancus £500,000 to £10,000,000 Cuff criteria only, is considered on its merits. Risk Warning: If you are co-funding you could lose part or all of your otherwise are shown before any provision for bad debts and may be subject to tax. Sancus do not Sancus Lending (UK) Ltd is authorised and regulated by the FCA (firm reference number 593992) and is incorporated under the laws of England and Wales, company number 07534003, registered office: 3rd Floor, The News Building, 3 London Bridge Street, London, SE1 9SG. Part of Sancus Group Holdings company no 57766 registered office Block C, Hirzel Court, Hirzel Street, St Peter Port, Guernsey GY1 2NL.
each loan application
South Jaxon Stevens, Bob Rowbotham, Clare Cuff & Tony Grillo up, 1 to 50 units structural renovation to residential conversion Semi-commercial Mixed Use
Indicative
Loans from £500,000 to £10,000,000
& Tony Grillo > Ground up, 1 to 50 units > Major structural renovation > Office to residential conversion > Residential | Semi-commercial | Mixed Use UKsancus.com|IRELAND|JERSEY | GUERNSEY | GIBRALTAR Indicative
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Development by Sancus Single point of contact
North Mel Fourie, Steven Darbyshire & Barry Dillon
> Office
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Single point of contact Loans from
Rates from 0.625% with competitive procuration fees
Development by Get developments off the ground with Sancus. Simply email us and one of our team will be directly in touch contact@sancus.com North Mel Fourie, Steven Darbyshire & Barry Dillon South Jaxon Stevens, Bob Rowbotham, Clare
provide private mortgages.
capital. Indicated returns, unless
Development by
> Residential |
LTV/LTC 75%/85% | 6 to 24 months
September 2022 TLS Insights insurance | 21
ew mortgage providers will lend on a new build property without a warranty, so if you need a mortgage to finish your build, or you want to borrow against the property or sell it when it’s completed, then you will need a build warranty.
Do I need build warranty?
Companies that sell new build warranties must sign up to the Consumer Code for Home Builders. Some warranty providers operate under their own consumer codes. If you are a self-builder, you want to look at specialist new build warranty providers. You will want to ensure you have an allrisk policy or site insurance during the build and a 10-year buildWarrantywarranty.policies will vary based on the warranty and building application type, but a warranty will generally cover structural damage and defects to foundations, roofs and walls. A residential building warranty typically lasts for ten years with differing levels of cover in the early years.
For a buyer, a build warranty is an insurance policy. It’s reassurance that the building has been constructed to a specific standard set by the warranty provider. It also means they can sell it within ten years without difficulty.
Unlike building regulation approval, a build (structural) warranty is not a statutory requirement, so it might not be top of your list when planning a new build project.
But even the best builders cannot guarantee 100% that there will be no problems with the materials or their workmanship
The regular inspections by the warranty provider can also be reassuring for the builder/developer, confirming the build is progressing without issue or highlighting problems before the build progresses too far.
It’s important not to confuse a build warranty with other types of construction insurance, like site or household insurance policies, so if you are in doubt, ask a local specialist insurance broker but it is fairly straightforward to find a reputable build warranty provider.
F
6. Build completion – final inspection
2. Submit plans and receive a quote for the policy Appraisal meeting and acceptance of the quote
|
How to get a building warranty (most provider schemes will follow a similar pattern)
5. The build begins, site inspections are requested at designated stages
Warranty policies will vary based on the warranty and building application type, but a warranty will generally cover structural damage and defects to foundations, roofs and walls
3.
7. Subject to all stage certificates and a completion certificate being issued, the warranty cover begins. Retrospective Building Warranties
Within the first two years of the warranty, the builder is held to account for any issues. They are obligated to fix them free of charge – this is the ‘defects insurance period’. The remaining eight years are the insurance period, meaning the builder has fewer liabilities as issues are usually due to wear and tear rather than structural problems.
4. Receive policy and contractual documents, including technical manual related to the build, site folder to log progress and inspection results
A completed or part-completed property is viewed as a greater risk from the underwriter’s perspective as the insurer has not had the opportunity to inspect and oversee key phases of the build. The increase of perceived risk for the insurer directly links to the premium cost of the warranty. Instances where developers don’t secure a warranty until after the build is structurally complete can see the premiums increase by as much as 100% from the original cost.
The critical thing to remember is that a warranty must be taken out before the build starts. Warranty providers will conduct inspections throughout the build and issue a 10-year warranty covering structural defects in the design, workmanship or materials used on completion.
1. Source a reputable warranty provider
So what you do if you do not already have a structural warranty or there is no record of one? A retrospective policy is designed to cover completed properties which do not already have the benefit of a structural warranty and is required to allow for the sale of units, asset re-finance and for peace of mind.
Typically, developers that are acquiring part complete or completed sites will at some stage require a finance facility (either at inception or exit) and the provider of that facility will want to know whether there is a warranty in place. If there isn’t, you won’t be able to draw down funds – thus having a warranty is key.
TLS Insights www.thelandsite.co.uk 22 | insurance
Commercial property warranties usually offer longer cover and are transferable to future owners.
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Unwarranted hidden fees
•
|
Building trust with developers
Labour and materials need to be paid for, so if drawdowns are late, it can cause delays and in worst case scenarios, people down tools and leave site. This is a two-way street with funders so its paramount developers are also providing all required information in order to avoid delays. Some of the common points tend to be; not flagging issues early on, missing or incomplete paperwork and claims that are difficult to substantiate. Communication and transparency are key. Pick up the phone to your development finance partner and discuss these points on every occasion.
This is usually caused by a lack of transparency in term sheets or terms have simply not been explained in detail to borrowers via the advisor on the case. When these hidden fees do crop up, it cements the negative experience borrowers may have faced on previous deals. Our job as advisors is to explain the total cost and unearth hidden fees.
• Unwarranted hidden fees
We recently worked with a borrower who had a direct relationship with a lender that had agreed a certain LTV across a portfolio, subject to the valuation report producing the figures provided. The figures came out as expected and the lender decided to reduce the LTV making the deal completely unviable for the client. This cost the client nearly £15,000 in fees and professional costs. Fortunately, we introduced the correct funding partner into the equation. We spend a lot of time building trust with developers and have their best interests at the forefront of everything we do in order to provide the right solutions.
Mesa Financial - enquiries@mesafc.co.uk - 020 3835 2495
With a looming recession, rising interest rates and funders withdrawing from the market. It’s never been a more important time to keep close with borrowers on existing lending facilities and making sure they are partnering with the right development finance providers on future business.
Change of lending parameters post valuation report
Keeping close with developers has never been more important
•
Change of lending parameters, post valuation report
Delayed drawdowns
Delayed drawdowns
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t’s quite rare that you turn up to a developer meeting where they haven’t been slightly disgruntled at a previous lender relationship. The scenarios tend to be fairly similar across the board and can on some occasions give the impression that every lender operates in the same fashion. It’s not simply not true but absolutely needs to be considered. These are the most common issues we come across:
September 2022 TLS Insights partner message | 25
It may be hard come by these days but in its simplest terms, buying land can be lucrative when done well
Transparency: Auctions offer a fair way of everyone having an equal chance of securing land or plot as the buyer can witness other bidders’ intentions.
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Why buy land at Auction?
A faster process: On the fall of the gavel there is an exchange of contracts, with completion 28 days later unless altered within the special conditions of sale which are made available to buyers before the auction.
ovid has driven a change in how property transactions take place over the past two years with a noticeable increase in the number of deals taking place at auctions. This has been accelerated due to the ease of access in the form of online auctions, expedited by the pandemic as in-room public auctions could no longer take place. Online auctions appear to be a trend that is set to stay.
‘The beauty of buying from auction is that you exchange contracts with the seller as soon as you win the auction. So, there’s no chance the seller can change their mind and try and up the price afterwards. Furthermore, you could win the property at a lower price than you were prepared to bid up to.’ - Auction House London.
Buying land at auction
‘Auction is one of the fastest and most secure ways of selling and purchasing property or land. When the gavel falls, contracts are exchanged immediately with the completion set at a predetermined date. From this point on, the sale is legally binding and there is no fear of fallthroughs or gazumping. For sellers – By gathering all potential purchasers together in the same place at the same time creates a sense of urgency and wanting, so you can rest assured the price achieved is the best you could possibly obtain. For purchasers – Most property that is sold at auction has the opportunity to either add value to or creates a longer investment opportunity for you. Auction property has always proven a popular method for investors, landlords, and developers alike.’ - Connect UK Auctions |
Legal packs: Legal packs are available to all potential buyers prior to auction. This includes information such as searches, title deeds, leases for tenanted property, as well as any relevant planning permissions.
TLS Insights www.thelandsite.co.uk 26 | auctions
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