Purchasing a listed property? Understand your finance and insurance options

Financing a listed property purchase

Broadly speaking purchasing a Grade I or II* is difficult, with many lenders not willing to lend on these properties, and often any planning and consent permissions being more difficult to obtain. However, Grade II listed buildings, which make up the majority of listed properties, are typically much easier to obtain a mortgage or finance on with most lenders willing to lend.

The grade of the building will determine what you can do to it, advises Laura Toke at SPF Private Clients. “If you are purchasing a Grade I-listed building needing extensive renovation, then obtaining funding is more challenging due to the number of lenders to choose from. On the other hand, lenders are usually happy to lend on a Grade II-listed property, assuming you have the necessary consents and planning permissions in place for any work that is required.”

Spencer Horsfall adds: “If the buyer needs to do renovations, a lender will give more consideration to the application as certain materials will be required and there will be restrictions as to what can and can’t be done to keep in line with the character of the building. Costs tend to be significantly higher when it comes to renovating a listed building.”

Potential buyers should do plenty of research before buying a listed property, checking with Historic England (or relevant country authority) and a builder as to what can (and can’t) be done. It is also worth paying for a structural survey to obtain as much detail as possible regarding the age of the building and materials used, and whether there is a higher risk of damp or other potential issues. Spencer says: “It is worth paying extra for a survey which highlights potential future costs. Lenders will not insist on this, many just ask for the standard mortgage valuation, but it’s worth getting it done so you are fully aware of what you are getting into.”

Beware of rebuild costs

Buyers should also watch out for the estimated rebuild or reinstatement cost of the property, which will be detailed on the mortgage valuation, and is usually much higher than for a non-listed property. Spencer says: “I recently arranged a mortgage on behalf of a client on a Grade II-listed property, which was on the market for £1.1 million. The surveyor calculated the reinstatement value at £2.8m. We challenged this and it was amended to £1.95m – still nearly double the actual value of the property – because of the cost of specialist materials and labour required to restore the original features, which can be an expensive and complex task.” Laura adds: “Compared to non-listed buildings, the value of a listed building’s materials is relatively/ proportionally higher.”

Laura adds: “It all depends on what works are required – if it is something more structural, mainstream lenders might be reluctant and therefore bridging finance may be the answer. Also, if you can’t live in the property while the work is being carried out, then you will need bridging finance.”

Insuring your listed property

These high reinstatement costs, which can be more than you paid for the property in the first place, underline the importance of making sure you have adequate insurance cover in place. At Abode, we specialise in arranging listed property building insurance – account handler Vikki Rushbrook explains that if your listed building is significantly damaged or totally lost, you may be required to reinstate it using original construction methods, as dictated by a conservation officer or public body, irrespective of the cost.

When it comes to working out the rebuild cost, she says, you will have the option between a desktop valuation or a site survey. In some instances, a desktop valuation will not be available for a Grade II* or Grade I listed building. And you need to consider the potential accuracy as a desktop valuation will not examine the inside of the building. “Don’t take the seller’s word for it as to what the rebuild cost is likely to be as you don’t know how they arrived at that figure,” warns Vikki. “Other factors to consider are that a specific architect may have been involved in the construction which will push rebuild costs up significantly. In many instances the original architect may not be available, and so you will have to use mirroring construction methods which can cost significantly higher than a standard contractor. This is to ensure that the material and build methods used are of a sympathetic nature to retain the properties historical importance. There is a lot of talk in the insurance industry about making sure you are not underinsured – the responsibility is always on the policyholder to make sure they have done their due diligence.”

She recommends getting your solicitor to check that alterations haven’t been made without the necessary consents being obtained “because a lot of insurers won’t touch those. And make sure you get a structural engineer to check that the building is structurally stable. Most insurers will offer full perils cover but if there are structural concerns, such as subsidence, then the insurer may not cover you for this. If the property is open to the elements, you may need a renovation insurance policy as well; some policies cover the work and not the structure, but we would recommend both so that you are fully covered.”

With many listed buildings having parts of the building or land open to the public, you may also need to consider incorporating liability insurance into the household policy.

As there are so many potential complications, Vikki stresses the need for specialist advice. “We work with around 35 insurers, so know where to find the best policy for your circumstances. Some policies are limited – they may only have a maximum rebuild value of £1m, for example – while others might not have enough valuables insurance to cover the cost of jewellery or watches. We can fine tune which insurer we approach for cover based on what we know. If other issues emerge, such as it turns out that a pre-existing extension was built without consent, we can guide you with regards to indemnity insurance.

“It further highlights the importance of getting the right advice. At Abode we can look across the panel of insurers to help give the best recommendations based on your circumstances. And with listed properties, it is likely circumstances will vary widely from case-to-case.”

If you are considering purchasing a listed property, then getting the right advice is crucial.

To speak to a specialist today about insuring a listed property, please call us on 01622 476 433.

You can learn more about SPF here.