Building extension on leasehold property

Are you considering extending your property? Extensions are a great way to raise a property value or increase rental income through landlords should be careful not to overdevelop or comply with local planning rules. There are points to consider when carrying out an extension at your property.

1. Understand market needs

The best time to extend is when you’re changing the property materially for a different demographic or market. For instance, if you have a two-bed house and you know the local market is short of three-bed properties. But be careful not to overdevelop the property so it is bigger than everything else in the street; some areas have a value limit. Houses in multiple occupation (HMOs) and flat-shares generally make more sense to extend than family homes, because if you add another bedroom the rent increase will be incremental rather than marginal. An extra tenant in an HMO will earn you an extra room’s rent, whereas an extra bedroom in a family home is unlikely to increase your rental income by more than 10-20 percent. How to increase the rent when the market rises

2. Consult your local estate agent

Letting agents will be dealing with dozens of different landlords with many different types of rental; they should know the market and its needs better than most. They may also be able to give you a steer on costs. Tenant responsibilities and rights

3. Don’t overextend

Now that you’re aware of the natural ceiling in terms of size and value for the street your property is located on, it’s important to keep the property in balance within itself too. Your common areas have to be proportionate to the number of bedrooms, and you’ve got to have sufficient bathrooms and living space to make an extension viable. Too often landlords shoehorn bedrooms into conversions to increase yields, which in turn reduces the rentability of your property. It’s important to note that loft conversions are not quite as popular as a ground-floor extension; ground-floor space is the most valuable because it’s versatile and can be readily accessed. The impact of Section 24

4. Check local planning regulations before extending your property

Verify whether a planned extension can be done under permitted development. Getting planning permission can be a lengthy process and isn’t cheap. The existing permitted development (PD) policy was due to expire in May 2019, and a replacement policy had not been announced at the time of writing. Always confirm with the local authority planning department that you do have permitted development rights and that these haven’t been removed by an Article 4 (a specific exemption ordered by the Government) or a previous planning application. Electrical safety standards for England

5. Speak to the experts

There are many options when extending, and it’s sometimes difficult to know which is best for your Property. The most common options are a ground-floor rear extension, a loft conversion or building out over a garage or existing extension. Basement conversions are another possibility, though less common. A ground-floor extension will require foundations to be excavated and will also eat up part of the garden. Loft conversions often have greater complexity because of the difficulty of fitting in a staircase from the floor below. If you’re unsure what you’d like to do, it may be helpful to get the advice of an architect. You’ll want to ensure you make the most of the space you have and that it will look good. How to deal with moulding at a rental property

6. Consider your neighbours

Good neighbours make all the difference when it comes to extensions. They can mean the difference between a smooth operation and a building nightmare. It’s important to talk to your neighbours and get them on your side with the project. Ensure their rights and comfort of living are considered at each stage of your project and make sure you keep lines of communication open. Also consider how close your extension will be to neighbours, whether it will impact of their light, and whether you’ll need a Party Wall Agreement. Increasing rents under tenancy agreements

7. Consider building regulations

Make sure all your works will comply with building regulations, even when planning consent is not required. Rear and side extensions are allowed under PD, subject to conditions such as projecting no more than three metres from the edge of an attached house and not exceeding more than 50 percent of the land around the original house. If you fail to comply with planning rules in any way, it can be a very costly mistake that you may have to put right, adding further cost. Ground rents are planned to be banned for new residential lettings

8. Notify your lender

Most landlords will find that it’s possible to fund an extension through borrowing. Your first option is to get a second loan from your existing lender, but their decision will be based on the current value and rental income. You may need to get a second loan from a different lender or even remortgage if your existing lender isn’t willing. And if the planning class of the property will change, you’ll need a bridging loan. When do leaseholders have to pay for improvements?

9. Don’t forget your property insurance

While extending your buy-to-let property, it is probable that your property will be vacant while the construction work takes place. As a landlord, you would need to notify your insurance company if your rental property is vacant or there is a break between tenancy agreements. During this time, your policy would cover severe property damage from extreme circumstances – fire, lightning, explosions, earthquakes, smoke, and aircraft crashes. In situations where the property is left vacant for more than 30 days, you are obliged to take certain precautions detailed in the policy wording, such as weekly internal and external inspections of the property.

An extension will also affect the rebuild value of your property. It is your responsibility to calculate and declare the value of your rental property to your insurance provider to ensure that it is insured to its full rebuild value. For an accurate valuation, we recommend that you seek professional advice from a qualified surveyor. How to get it right as a first time landlord

10. Consider HMO implications 

Check whether your project will turn the property into an HMO under either mandatory or local authority discretionary requirements. By adding a bedroom, whatever the type of extension, you could change the HMO status of your property, which might require change-of-use permission and for the property to be licensed.

If you have any questions on property or block management, please contact Pelin Martin to book a 30-minute complimentary property consultation on +0208 994 7327 –