A regular client of AFIG, who’s portfolio is spread across the Lake District attended an auction and came away the owner of this apartment because they ‘thought it was a good price’. Now, this isn’t always the best logic at auction, preferring good solid research and planning prior to raising a hand and committing to a property purchase, but that often goes out of the window in the heat of the moment.
Situated in Kendal, Sand Aire House, was the former HQ of well-known insurance company prior to being converted to around 80 apartments back in 2002. The building was popular with owners and tenants alike.
But, there was a problem…
During the legal process, it was established that the building did not benefit an EWS1 certificate and the intended mortgage would therefore not be granted to assist the purchase.
Following the Grenfell disaster in 2017, the Government investigated the cladding and concluded it was insufficient and unsafe and brought in the need for all buildings to be checked and carry an EWS1 (External Wall System) certificate.
The purchase price wasn’t in fact too good to be true, but reflected the lack of the required EWS1 and indeed was only suitable for those with cash, or other means to purchase.
Although the building was not deemed unsafe, it did not carry the certificate, which meant traditional lenders would not lend a penny. We presented the case to a short term lender, who agreed it was simply a matter of time until the certificate would be in place and agreed a 65% loan on the property, with only two weeks to the completion deadline.
Once complete, our client found a tenant and, with other owners, progressed the EWS1 issue and that remains ongoing. A local agent mentioned they had an investor looking to purchase in the building and our client eventually sold the apartment for almost twice the auction price, albeit still considerably below market value, which will stabilise once the certificate is in place.
This is an excellent example of how bridging finance can assist when considering non-standard property transactions.