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From The Times

December 7, 2000

Guide to buying above a shop

Everything you need to know about living over the shop

Lorna Blackwood

A FLAT above a shop may not have the same appeal as a Victorian conversion in a leafy cul-de-sac. But given the lack of affordable housing, living above commercial premises is losing its stigma. It creates safer town centres, reduces the need to build on greenfield land, and uses vacant space - the campaign group Living Over The Shop estimates a potential to house 500,000 people. Below, Bricks and Mortar answers a few key questions:

Is it still cheaper to buy over a shop?

Definitely. Depending on the type of business underneath, you can save between 10 and 20 per cent of the price of an equivalent property on a local residential street. You get a lot more property for your money as well.

Is there a particular type of buyer for these properties?

Flats above shops are very popular with investors: being above a business does not tend to lower the property's rental value. Tenants on six-month or yearly contracts are not as bothered as owner-occupiers about what lies beneath them. Such properties are popular with first-time buyers who want to buy in a certain area but cannot afford to do so unless they live over a shop.

What should you do before buying above a shop?

You are almost always investing in a shared leasehold, so look at how long is left on the lease and how the service charge is split. Service charges on a commercial business are normally much higher than on a residential property: when the building is split between the two, there is no standard rule as to who pays what.

Check there are no plans for the business to change its use. In addition, bars and restaurants can incur much higher building insurance because of fire and security risks, which means your premium may be higher.

Is the price affected by the type of business?

Value does differ in these circumstances; buying above a bookshop would be more acceptable than living over a restaurant or bar, and prices reflect this. A fair number of first-time buyers at first think that they have picked up a bargain, but soon find that they regret their purchase.

Ben Williams, manager of Kinleigh Folkard & Hayward estate agents in Peckham, South London, recalls two young men who bought a flat above a chicken takeaway. “Initially they were quite blasé about it,” he says. “But their floors would heat up every day because of the cooking downstairs and the smell of chicken filled their home. They got the flat cheap, but had enough and sold after six months.”

Is it hard to get mortgages for these properties?

Some lenders will not consider properties above a business. For those that do, it is common for the buyer to put down a larger deposit, up to 30 per cent sometimes.

Is there a possibility to buy the freehold?

On a mixed residential and commercial building, a third-party investor usually owns the freehold. In many cases the owner of a flat above a shop has no right to buy the freehold under enfranchisement legislation.

For more information, go to: www.livingovertheshop.org