The Pros and Cons of Buying a Flat Above a Shop

With many would-be first-time buyers being priced out of the property market, one potential way onto the ladder is to buy a flat above a shop or retail outlet, particularly in and around London. But is it a good idea?

Anderson Associates are chartered surveyors with many years of experience in the property market in south east London, Essex, Kent and Suffolk.

Here we look at the key advantages and disadvantages of buying a home above commercial premises.

The Advantages

The Price – Experts say flats above shops are up to 15 per cent cheaper than ‘normal’ flats in the same area, meaning that they are extremely tempting for a potential first-time buyer. It can also mean, however, that they aren’t always a very good investment as they won’t always increase proportionally in value as much as those not above retail outlets.

The Bigger Rooms – In London particularly, shops and their associated flats are often part of Victorian or Edwardian properties, which means they date from the 1830s to the early 1900s. In these cases, the flats can be more spacious, often with higher ceilings and larger windows.

The Location – Although living above the shop can lead to less peace and quiet, the flip side is that it can be extremely convenient, often with a number of different retail outlets, restaurants, pubs and bars all within close walking distance.

If you work away from the areas the flat is, you won’t be subject to the usual daytime disturbances experienced during normal working hours.

The Disadvantages

The Unsocial Hours – This is a problem which will apply to retail businesses, although some will be worse than others. All shops need to re-stock, usually early in the morning or evening. It can be useful to check out the location of the bedrooms – and the timing of deliveries of nearby businesses – as part of your pre-purchase checklist and enquiries.

Equally, if you are above a takeaway or restaurant, people will be using it until late at night or even into the early hours of the morning, particularly at weekends. Many retail outlets will create some noise during normal business hours.

This type of property is probably not a good idea if you do shift work or work unsociable hours.

The Fire Risk – Again, this could be an issue for flats above restaurants and takeaways. Regular cooking, and particularly frying, creates a risk of fire. There is also the problem of food smells, while birds and vermin may be attracted to any waste. And the restaurant’s customers may need somewhere to park, so vehicle access and noise could be another issue.

The Access – Does it have its own private front door? If your flat does, then it will be nicer to live in and easier to sell than those whose main entrance is in a dark alleyway, behind the premises, or, worst of all, through the shop itself.

The Future – You might think you’re getting a bargain if your downstairs neighbours are a high-end designer store who don’t have many deliveries or customers to disturb your peace and quiet. But what happens if they move out?  Remember there are no certainties in the business world.

The Difficulty of Getting a Mortgage – Some mortgage companies are reluctant loan on properties above commercial or retail outlets, particularly flats over takeaways, for the reasons outlined above. You may end up paying high buildings insurance premiums as a result.

A mortgage consultant can advise you on who will be able to offer you the best deal.

Anderson Associates – Chartered Surveyors in South East London

If you need a chartered surveyor in South East London, Essex, Kent or Suffolk, call Anderson Associates. We are fully independent, which means we work for you and not the mortgage lender, so any advice we give you will be truly impartial.

If you are thinking of buying a flat above a shop or any other form of retail premises, we would recommend our full building survey. This will, where appropriate, identify any problems with the whole property, which will be important if you share parts of it with your commercial neighbour. The survey will list every defect and provide a general estimate of how much these defects will cost to put right, as well as the assumed split of repair responsibility.

Whilst the other areas of the property do not form an immediate part of the intended purchase, share free/leaseholders often have a repair responsibility extending to the whole building. Any repair costs incurred by the freeholder are often divided equally regardless of the work involved or the position of their part of the property in relation to that work.

Although there are generally no onerous clauses in standard share freehold agreement or leases. Any uncertainties as to issues raised in this report can potentially cause problems for all parties with unexpected costs not previously known about.

Annual costs are normally to be payable as service charges &/or ground rent. These should be confirmed.

The service charge should include all or some/most of the following:

  • Maintenance/cleaning of internal common parts
  • Buildings insurance (not contents)
  • Water rates
  • And the overall structure, including walls and roof and lift maintenance (if any).

Your solicitor should determine the extent and areas the service charge covers with regards to repair and maintenance as well as a breakdown of these costs.

It should be clear in the share freehold agreement/lease the other ‘extra over’ costs involved in properly maintaining the building as a whole on items that are not included from both routine and cyclical maintenance perspectives.

You should be particularly aware that major works undertaken – that is, roof works and external redecorations – are not always covered by the service charge.

The cost of this work is normally recovered from the share free/lease holders.

You should instruct your solicitor to make the necessary enquiries with the vendor to determine if any major works are intended to be undertaken on the property in the near future and what possible financial implications they may have on any potential buyer.

If you would like to learn more about Anderson Associates’ services, follow this link and fill in the online form or call us on either 0800 652 8285 or 01473 623656.

Photo: SEBASTIAN BALLARD/GEOGRAPH.ORG.UK