Question: My wife and I have been renting a leasehold live/work flat for six years. We are now buying it and our mortgage adviser told us we would get a better mortgage if it is converted to a 100 per cent residential unit.
We have only ever used it for residential purposes and have agreed with the vendor a price subject to the change of use. The council has approved the change and we're ready to exchange but our solicitor, who has been aware of the change of use, has now said that the freeholder wants £25,000 to do a deed of variation in relation to our lease.
We now have a mortgage offer from a bank which allows the property to be both live/work and purely residential, so the change of use for residential was not really needed. What happens about paying the £25,000 — what do we do?
Answer: Because the vendor has agreed a price which is subject to the change of use, if you do not now proceed with the change, they may wish to reconsider the figure. This could affect your mortgage offer, as a price change can affect the loan to value.
Currently, the terms of your lease require you to live in the flat and run a business from it. You haven't been doing that, so technically you are in breach and your landlord could terminate your lease. You appear also to be breaching a planning condition by using the flat solely for residential purposes.
Although you do not need to change the use to get a good mortgage rate, it may be prudent for you to do so to rectify the situation.
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