Developing a Victorian Property

As I’ve mentioned before, it’s never an easy ride developing a property for profit. Developing a listed property is more difficult still and not to be recommended for the novice developer. That said, it’s almost always period properties that manage to keep their romantic appeal over the more modern ones.

The vast majority of period property purchasers are pleasantly surprised to find that period features have been retained and enhanced. It can be quite disappointing for viewers to a period property to discover that the interior has been cleared of features and looks like a new-build. Therefore, it’s important to remember that if a property is a period one, you must keep the internal and external features.

Victorian properties are probably the most common of all listed properties. This is because the Victorian era covered many years. It took over from the Georgian period and began in approximately 1840 and lasted until around 1900. It’s fairly easy to notice the crossover period between Georgian and Victorian, unsurprisingly Georgian architectural features blended gradually into Victorian. A specific feature of typical Georgian architecture is symmetrical and proportional windows of many small panes, where the height of the windows is exactly double that of the width. Victorian properties however have very tall and narrow windows of only one or two panes. Technology had moved on to facilitate larger panes of glass which allowed more natural light to enter the property.

At the small end of Victorian properties, there are the long rows of terraced houses. These are situated in almost every town and provide the novice developer with an ideal property to learn the ropes on. They tend not to vary too much in layout; the only differences are the orientation of the stairwell and which floor the bathroom is on. Victorian properties tend to be robustly designed and built but occasionally turn out to have no foundations. This means that a survey is highly recommended as it’s not unheard of to find subsidence to some degree in these properties. On a more optimistic note though, most of these houses that were built without foundations have now had the necessary work carried out to prevent catastrophic movement. Always make sure though…remember – caveat emptor.
Larger Victorian properties are often built in a ‘villa’ style. This means that they were built in a certain architectural style that the smaller terraced houses weren’t. This style can be shown in the ornate features that these properties have, such as intricate window mullions and projected porches. Much of this was influenced by the gothic revival period (1850-1880). These houses often had cellars and attic space for servant’s accommodation. Victorian houses tended to be either terraced or detached in towns and cities. Semi-detached Victorian properties are more likely to be found in rural areas as they were built for the workers on the large estates.

The Victorians were the first to introduce the beginning of what we know now to be Building Regulations.  From the middle of the 19th century, there was an increased importance placed on sanitation in properties. Of course this wasn’t always particularly comfortable in the small properties (i.e. outside toilets) but larger houses were more likely to have a (downstairs) cloakroom built. Proper drainage (meaning the sewers were enclosed) was also introduced. Towards the end of the Georgian period, it was only a very few properties that had running water. By the end of the Victorian era, hot and cold running water was available in the majority of homes. The cellars of Victorian houses were used for the storage of coal. The pavement outside and immediately in front of the property would have a small flap or cover that allowed the coalman to pour the coal directly into the cellar without having to carry the coalbags through the house.
The Victorians strongly believed that a ‘bare’-looking interior was a sign of very bad taste. Subsequently, they tended to fill their homes with as many knick-knacks as possible. It is extremely unlikely that anyone would follow such a trend in modern times. However, it’s also not a good idea to attempt to incorporate a modern, almost minimalistic look into a period home unless you absolutely know what you are doing and it can be done sympathetically. Most people can’t.   A compromise between the two would be to look for comfortable and classic looking fixtures and furniture to acknowledge the history of the property without overfilling it. The general intentional feeling of Victorian homes is of comfort. The Victorians prized their home-comforts more than the Georgians.

In common with the Georgian era, Victorian house interiors in towns and cities were generally not painted in particularly bright colours. This was because of a combination of the pollution and the fact that paint technology was not very advanced. As the era progressed though, more interesting colours became popular such a rich greens and reds. The general idea was to use a single colour as a main one and add several ‘secondary’ colours to compliment it. These secondary colours were intended to compliment the main one by giving a contrast but without clashing. Varying textures between mouldings, ceilings and woodworks was also popular towards the end of the 19th century.

The most obvious features of Victorian interiors is coving, cornicing and ceiling roses. Originally, Dado rails were fitted in dining rooms at chair-back height. This was to protect the walls from dining chairs hitting them whenever a diner stood up. Picture rails were fitted in drawing rooms and parlours, where they did actually support pictures hanging beneath. Coving and ornamental woodwork should be painted in gloss white paint. This gives a ‘clean’ look that contrasts with the colour of the wall (just make sure the lines are straight…).

Wallpaper also became popular in the Victorian era. Although it was not quite as you might imagine. The patterns were extremely bold and were full of florals and swirls. In common with the idea of filling the property with lots of ornaments, it’s unlikely a developer would seek out Victorian style wallpaper unless it was intending to be a very accurate ‘museum’-type property. A good compromise would be to look at the Laura Ashley type of wallpaper. This would be regarded as sympathetic to a Victorian property, without being too accurate (i.e. dark). There’s no reason for a Victorian property to ever be dark. If the interior furnishings and decoration are light, then in combination with the tall windows, a Victorian property can be a very pleasant place to be.

Developing a Mixed Use Property

A very common way of getting started in property development and investment is converting or renovating a mixed use development.

‘Mixed-Use’ can mean a combination of Residential, Office or Retail within a single development (it’s highly unlikely Industrial type properties would be included in this, for example I can’t imagine a residential flat being situated above an industrial unit). So an example of this could be a shop with a flat/flats above it, or offices with residential above. Incidentally the residential portion is situated towards the top of the property because it’s not likely to require a street-level frontage, like a shop or an office might. The residential area of the property also tends to be quieter and the commercial occupants are less likely to have cause to go upstairs into this area of the property.

It is certainly possible to convert only part of a property to a use that’s different to the original one. Be aware though that (currently) Planning Consent is required to change the use of a property (or part of a property) from Commercial to Residential and between sub-groups within Commercial. Building Regulations also need to be fully complied with.

The different ways of occupying a property are:

1. Freehold. This is the closest to owning the property outright (It’s only a Government body which can carry out compulsory purchase though). The Freeholder theoretically owns the plot, the land beneath the plot and the area above it (although this isn’t really enforceable in reality). Being a Freeholder offers the luxury of selling a leasehold interest in the property if he/she wishes.

2. Leasehold. This is usually for a period of time (term) of 99 years or more (sometimes 999 years). The freeholder effectively sells the right to use the property for the term stated in the contract. Along with this, the Leaseholder sometimes receives the right to allow Tenants to occupy the property and collect the rent. In order to reduce the chances of confusion, this is often called the Long-Leasehold interest. It is bought in a similar way to the Freehold Interest (i.e. a large amount of capital is paid for it, rather than a monthly or quarterly rent).

3. Tenancy. This is really just a different way of occupying the property under a leasehold interest, however for the purpose of avoiding confusion over these occupancies, I refer to it as a Tenancy (even though the occupational contract is still called a Lease…). This is paid for in the form of rent, usually paid monthly or quarterly (depending on it being Residential or Commercial). A tenancy is always shorter than the long-leasehold interest (even if it’s only 1 day shorter) but is usually much shorter, between 3 and 25 years is usual. A tenancy does not really have much value in itself other than to the landlord. This is because it’s not really possible to sell a tenancy by itself; you can however purchase the leasehold interest with a tenant already in place.

Commercial and Residential tenancies are usually quite different. The main issue is that all Commercial tenancies are awarded Security of Tenure unless specifically contracted out of it. This means that a Commercial landlord can only make the tenant leave the premise at the end of the term in certain circumstances (for example if the landlord wants to redevelop the property and has plans in place to prove this). To contract out of this, the lease agreement must specifically state that both parties wish to contract out of the Security of Tenure provisions of Part 2 of The Landlord and Tenant Act 1954, s 24-28 (or words to the same effect). Contracting out of the act should benefit both parties (such as when a lower rent is agreed upon to reflect a lower ‘risk’ to the landlord).

In contrast, Residential tenancies tend to be more heavily weighted in favour of the Landlord. A tenant does not really have any Security of Tenure at the end of the term. Many Residential tenancies are only for an initial period of 6 months. If the tenant stays in the property with the permission of the landlord at the end of the term, a Periodic Tenancy is formed. If the tenant pays rent on a monthly or weekly basis, this period becomes the notice period for either party to bring the tenancy to an end. A periodic tenancy continues until the landlord or the tenant brings it to an end.

It’s important to have an understanding of how the different types of occupation work. When developers of mixed use properties consider their projects, they intend it to work in a slightly different way to the usual private residential developer. Where a private developer buys a property at a reduced price, spends the bare minimum but produces a good finish then sells on to a new owner, a mixed use development often requires a different approach. Of course it is possible to buy and sell a mixed use development in the same way as a small residential (i.e. the freehold), but because of the combination of property types within the development it usually makes more sense to keep the freehold of the property and sell the long-leasehold interest as and when an occupier or investor is found.

If the freehold is retained, tenants can be found to occupy the office or retail portion. The residential areas of the building can be let the same way as the commercial but this involves a lot of management of tenants taking 6 or 12 month tenancies and of course, the developer will not receive capital in return in a lump sum. It’s far better to sell the long-leasehold interest in the residential units to either investors or leasehold-occupiers. This way, a profit can be made (the value of a long-leasehold interest is more-or-less the same as the freehold price) on individual units of the property. Investors or leasehold-occupiers can buy individual long-leaseholds interests one-by-one if necessary. If the residential units are above the ground floor, it is not possible to sell any of the freehold interests in these. A freehold must always be on the ground floor or associated with a property on a ground floor. If an investor purchases any of the long-leasehold interests, they will be obliged to honour any tenancies that might have been agreed prior to their completion.

It’s also important to understand how service charges apply to a property of mixed uses. A service charge is essentially a further charge to the tenant(s) to contribute to the upkeep of common areas such as grounds maintenance or cleaning and decorating of hallways and stairwells. Service charges should be ‘fair and reasonable’ and not produce a profit or a loss for the landlord. For Commercial tenants, The Royal Institute of Chartered Surveyors publish a Code of Practice guide on service charges. The method of dealing with dispute resolution will be stated in the lease. Residential tenancy service charges however, are very strictly regulated. A landlord who doesn’t follow the statutory procedures might find himself limited under law as to how much can be recovered from the tenant at the end of the occupancy.
Tenants should be supplied with a schedule of the previous year’s service costs and justification of the current level of charge. In a mixed use property however, tenants will occupy different sized areas and even use different facilities in the property. For example a Commercial tenant on the ground floor would not be expected to pay for the upkeep of a lift to service the residential units on the floors above. The principle way of deciding who should pay for what, is to consider which property a particular service will benefit. A Commercial tenant should have the opportunity of negotiating the service charge. It is sometimes possible to opt out of the charge for services that are available but will not be used.

A Checklist to Get a Property Sold

If you are planning on developing a property, the very final stage is the sale at the end.  No developer wants a long wait to sell the property, no capital or rent is coming in and meanwhile mortgage repayments have to be covered.  The longer it stays on the market, the more the developer will financially lose out.

So, to ensure that you have the very best chance of getting the completed property sold, here is a checklist to run through so that you know you are less likely to miss out.

  1.  Establish your position.  You have to realistic about selling the property; if the market is currently flat in the area you are selling in you might well have to reduce the price at some point in the marketing process.  If you are not in a particular hurry to sell, you might feel that reducing the asking price is not an option you want to consider.  Don’t rule it out though.
  2. Consider the purchaser’s aspect when pricing the property.  Clearly it will depend on what the property is valued at but remember that houses are usually priced strategically just below the Stamp Duty Land Tax thresholds.  This is not coincidence.  If a property is priced just below the threshold and a competing one is just above it, the difference between them might only be a few thousand pounds but the cheaper one is likely to be on the market for a shorter length of time.
  3. Consider your market.  Much is made on TV property programmes of selling to ‘young professionals’; however there are occasionally people outside this category who buy properties.  Of course, I recommend buying a development property with a particular customer in mind but you should certainly be selling it knowing who should be buying it.  Students for example (or rather their parents), will be considering different things than a young family or a retired couple.  Far better to cater for an existing local need than trying in vain to sell a property  that’s being marketed to the wrong people.  Speak to Estate Agents (several), they should be able to tell you where the local needs lie.
  4. Ensure that the work that needs to be done, is actually done.  If you’ve just had work done on the property then there shouldn’t be any excuse for leaking gutters, damp or mildew on walls or dodgy hinges on doors (for example).  Not every developer will be carrying out a complete ‘gutting’ of the property, so if the turn-round is a rapid one to get it back on the market, make sure nothing is overlooked.  If someone is having a viewing and looking round the property, if they find one obvious fault they might start to look for others.
  5. Always have an idea of what the property is worth.  Property valuation is not rocket science; it’s easy to get to know a particular area’s property market.  After a few weeks you will probably be able to gauge neighbouring property prices to within around 5% of what a professional valuer would put it at.  This will definitely help when it does finally get to the stage of accepting an offer, you will be able to distinguish between a silly offer and a realistic one.  Having a look on a couple of property websites will help to get an idea of what neighbouring properties sold for (www.nethouseprices.com or www.rightmove.co.uk).
  6. Choose the right estate agent.  Some are good, some are bad but it’s highly likely you will be stuck with them for at least 6 months if the property does not sell.  Word of mouth is a good way to get an idea of true reputation, and don’t be taken in by their sales pitch, remain sceptical!  If you choose to put the property on the market with a single agent, there’s no reason why you should have to pay more than 1% (plus VAT) of the sale price.  If you go with dual agents, it’s very likely you will be charged 2% (plus VAT).
  7. Once the property is on the market, make sure it’s kept tidy inside and out whenever possible.  Potential purchasers will do ‘drive-byes’, where they drive past a property to have a quick, discreet look and get a feel for the area without committing to a viewing.  If there’s rubbish or builders waste left outside the property, it can be really off-putting for them.
  8. If the estate agent has promised you that the property is displayed in their window and being aggressively marketed, periodically check that they’re telling the truth.  Speaking from experience, an agent had stressed that the particulars of a house was in their window for all passers-by to see; but upon arriving at the shop, my wife and I found that not only was it not in the window it wasn’t displayed inside the shop either.  They were poor agents and this was the final straw in making the decision to sack them.
  9. Be picky about the property details produced by the agent.  Their job is to get your property sold as quickly and efficiently as possible.  If you feel that the details are not satisfactory, don’t be afraid of telling them.  You will ultimately be paying for this service so they should always be acting in your best interests.
  10. Pester the agent for feedback on viewings.  Agents are not always the most communicative of people so they might need prompting occasionally.  You might be fobbed off with a vague comment the agent picked up from the viewee, but after a few weeks of pestering them for accurate feedback, they’ll make sure they have proper answers for you.  Some aspects of the property might be unavoidable, such as parking.  However some things might be easily solved such as borrowing some furniture to ‘pad-out’ an empty property.
  11. Consider exactly what you might be prepared to put in the property for the purchasers.  For example you could throw in all the fitted carpets if the purchasers pay full asking price; they don’t know that you managed to get a load of inexpensive carpet from a friend.  Same for curtains, you (as developer and vendor) might feel that putting up some (decent quality) curtains is of such little consideration as to be next-to worthless to the purchaser.  This is not the case, buying and fitting good quality curtains and rails can run into thousands of pounds in some cases.  If you can source them cheaply, you might well swing the deal in your favour.
  12. When an offer does come along, you should have a figure in your mind that marks the border between what would be acceptable and what wouldn’t.  This value has to be realistic though.  In the current climate, buyers are looking for bargains and if you won’t consider dropping the price at all then it might be a while before the property sells.  It’s a difficult market and sellers have to do what they can to keep their businesses running.  Obviously a reduction in selling price over what you might have expected will reduce your profit margin, therefore consider this very carefully.
  13. Do anything possible to increase the exposure of the property.  Sarah Beeny’s website Tepilo is very good, and free.  You won’t lose anything by making use of it!  If you look around, websites and blogs can be free too these days (for example www.wordpress.com), give the property its own site!  You have nothing to lose and it should not affect the arrangement you have with your estate agent.

13 Steps to Getting a Property Sold

If you are planning on developing a property, the very final stage is the sale at the end.  No developer wants a long wait to sell the property, no capital or rent is coming in and meanwhile mortgage repayments have to be covered.  The longer it stays on the market, the more the developer will financially lose out.

So, to ensure that you have the very best chance of getting the completed property sold, here is a checklist to run through so that you know you are less likely to miss out.

  1.  Establish your position.  You have to realistic about selling the property; if the market is currently flat in the area you are selling in you might well have to reduce the price at some point in the marketing process.  If you are not in a particular hurry to sell, you might feel that reducing the asking price is not an option you want to consider.  Don’t rule it out though.
  2. Consider the purchaser’s aspect when pricing the property.  Clearly it will depend on what the property is valued at but remember that houses are usually priced strategically just below the Stamp Duty Land Tax thresholds.  This is not coincidence.  If a property is priced just below the threshold and a competing one is just above it, the difference between them might only be a few thousand pounds but the cheaper one is likely to be on the market for a shorter length of time.
  3. Consider your market.  Much is made on TV property programmes of selling to ‘young professionals’; however there are occasionally people outside this category who buy properties.  Of course, I recommend buying a development property with a particular customer in mind but you should certainly be selling it knowing who should be buying it.  Students for example (or rather their parents), will be considering different things than a young family or a retired couple.  Far better to cater for an existing local need than trying in vain to sell a property  that’s being marketed to the wrong people.  Speak to Estate Agents (several), they should be able to tell you where the local needs lie.
  4. Ensure that the work that needs to be done, is actually done.  If you’ve just had work done on the property then there shouldn’t be any excuse for leaking gutters, damp or mildew on walls or dodgy hinges on doors (for example).  Not every developer will be carrying out a complete ‘gutting’ of the property, so if the turn-round is a rapid one to get it back on the market, make sure nothing is overlooked.  If someone is having a viewing and looking round the property, if they find one obvious fault they might start to look for others.
  5. Always have an idea of what the property is worth.  Property valuation is not rocket science; it’s easy to get to know a particular area’s property market.  After a few weeks you will probably be able to gauge neighbouring property prices to within around 5% of what a professional valuer would put it at.  This will definitely help when it does finally get to the stage of accepting an offer, you will be able to distinguish between a silly offer and a realistic one.  Having a look on a couple of property websites will help to get an idea of what neighbouring properties sold for (www.nethouseprices.com or www.rightmove.co.uk).
  6. Choose the right estate agent.  Some are good, some are bad but it’s highly likely you will be stuck with them for at least 6 months if the property does not sell.  Word of mouth is a good way to get an idea of true reputation, and don’t be taken in by their sales pitch, remain sceptical!  If you choose to put the property on the market with a single agent, there’s no reason why you should have to pay more than 1% (plus VAT) of the sale price.  If you go with dual agents, it’s very likely you will be charged 2% (plus VAT).
  7. Once the property is on the market, make sure it’s kept tidy inside and out whenever possible.  Potential purchasers will do ‘drive-byes’, where they drive past a property to have a quick, discreet look and get a feel for the area without committing to a viewing.  If there’s rubbish or builders waste left outside the property, it can be really off-putting for them.
  8. If the estate agent has promised you that the property is displayed in their window and being aggressively marketed, periodically check that they’re telling the truth.  Speaking from experience, an agent had stressed that the particulars of a house was in their window for all passers-by to see; but upon arriving at the shop, my wife and I found that not only was it not in the window it wasn’t displayed inside the shop either.  They were poor agents and this was the final straw in making the decision to sack them.
  9. Be picky about the property details produced by the agent.  Their job is to get your property sold as quickly and efficiently as possible.  If you feel that the details are not satisfactory, don’t be afraid of telling them.  You will ultimately be paying for this service so they should always be acting in your best interests.
  10. Pester the agent for feedback on viewings.  Agents are not always the most communicative of people so they might need prompting occasionally.  You might be fobbed off with a vague comment the agent picked up from the viewee, but after a few weeks of pestering them for accurate feedback, they’ll make sure they have proper answers for you.  Some aspects of the property might be unavoidable, such as parking.  However some things might be easily solved such as borrowing some furniture to ‘pad-out’ an empty property.
  11. Consider exactly what you might be prepared to put in the property for the purchasers.  For example you could throw in all the fitted carpets if the purchasers pay full asking price; they don’t know that you managed to get a load of inexpensive carpet from a friend.  Same for curtains, you (as developer and vendor) might feel that putting up some (decent quality) curtains is of such little consideration as to be next-to worthless to the purchaser.  This is not the case, buying and fitting good quality curtains and rails can run into thousands of pounds in some cases.  If you can source them cheaply, you might well swing the deal in your favour.
  12. When an offer does come along, you should have a figure in your mind that marks the border between what would be acceptable and what wouldn’t.  This value has to be realistic though.  In the current climate, buyers are looking for bargains and if you won’t consider dropping the price at all then it might be a while before the property sells.  It’s a difficult market and sellers have to do what they can to keep their businesses running.  Obviously a reduction in selling price over what you might have expected will reduce your profit margin, therefore consider this very carefully.
  13. Do anything possible to increase the exposure of the property.  Sarah Beeny’s website Tepilo is very good, and free.  You won’t lose anything by making use of it!  If you look around, websites and blogs can be free too these days (for example www.wordpress.com), give the property its own site!  You have nothing to lose and it should not affect the arrangement you have with your estate agent.