The change in permitted development rights (PDR) may encourage surveyors to down value flats above shops and according to some property experts make it difficult or impossible to obtain a mortgage.
Since 2015 PDR allows existing A1 or A2 (that is financial or professional services offices) to be changed to restaurant use. Regrettably some flat owners who have already purchased a property above a shop could be affected by this and it could also mean that when they come to sell on the flat they could end up getting less for it because of this. Property above a shop is usually less attractive to a purchaser and hence less valuable. More importantly many lenders will also be reluctant to lenders in such homes and therefore vendors are often forced to consider a cash sale.
Cash investors will typically look for a discount and valuers will therefore reflect this in their valuation. Some lenders have a blanket policy in their criteria of not lending on flats above commercial premises, however in practice some will be flexible if the flat is in a good location and depending what the commercial premises are. As well as restaurants, takeaways and pubs, lenders don’t like dry cleaners and nightclubs or indeed and business that may cause a noise or smell or any other type of nuisance.
If all, or even the majority of lenders who currently consider lending on flats above A1 premises were to change their policy this would have a significant knock on effect on the value of all flats above A1 premises.