Councils across the country are keen to put empty properties back into use, especially since in most cities there is a shortage of housing, and if you check with your local council, you’ll probably find that they have an ‘Empty Property Strategy’ which will outline their initiatives to work with owners to get empty properties habited again.
As property investors / developers, empty properties are good fodder and you may be able to register your interest in receiving details of empty properties that the owners would like to sell, with the local council. They can then ‘match make’ owners of empty properties who want to offload them, with developers and renovators who would be interested in buying.
According to The Empty Homes Agency, there are an estimated 785,708 empty homes in the UK and enough empty commercial property to create 420,000 new homes so there is a strong incentive to get these dwellings back into circulation.What is defined as an ‘empty property’?
Empty properties are defined as those that have been empty for more than 6 months. This includes dwellings that are:
- empty between changing occupants
- undergoing modernisation, repair or conversion
- awaiting demolition
- waiting probate
- newly completed but not occupied
- owned by a charity
- unoccupied annexes
Any group of bedsits, counted as one dwelling, only count as vacant when all are vacant.
Empty properties considered exempt from this definition are:-
- Second homes, holiday lets, and flats and houses normally occupied by students;
- Properties where the owner is in prison, receiving or giving care,
- Properties where the owner is in the armed or visiting forces;
- Properties that are flood damaged.
However, for you to benefit from the VAT exemptions below, no part of the property must have been lived in during the past 2 years (reduced rate) or 10 years (zero rate).What are the advantage of buying an empty property to restore?
There are VAT exemptions available on empty properties to encourage restoration and re-use of them. If you renovate or carry out work on a ‘normal’ building, you will normally be liable to VAT at the standard rate. This applies to materials used and labour costs. However, this can be significantly reduced or eliminated if the property has been empty for over 2 years. The 2 main exemptions are:
- If the property has been empty for 2 years or more – VAT is reduced to 5% on most costs associated with renovating single house dwellings.
- If the property has been empty for 10 years or more – VAT is reduced to zero on the costs of raw materials (either purchased by the owner himself or handed to the builder for use) and the builder can reduce his rate of VAT to 5% for refurbishment work.
Local Authority Grants
Many local authorities will provide grants to owners of empty property to assist them in getting them restored and back into use. The eligibility will vary between different councils but you could find that up to half of the cost of your renovation bill is funded by the council. There will, of course, be a maximum grant and any funding provided will come with terms and conditions - so you should check with the local authority that covers where the property is located for their own rules.
Energy Efficiency Grants
You may also find that you can get a grant for home insulation etc. Contact the Energy Saving Trust on 0800 512012 or visit www.energysavingtrust.org.uk
for information on what grants might be available
Interested in buying an empty property to restore?
There are certainly plenty of compelling reasons as to why to seek out empty property to invest in, but before you start, your should first consider these points:1. Make sure you are allowed to do what you want to the property. It's all very well having imaginative plans to redesign the property into the house of your dreams but if there are legal restrictions, or if it's a listed property, you may not be allowed to.
2. Work out a proper budget before you start. As with any restoration work, running out of money half way through meaning you have to abandon or postpone the project, somewhat defeats the point!
3. Build the right team of people to help you. Choose architects, builders and legal eagles who you can work with and will help you, not take you for a ride.
4. When commissioning a builder to carry out any renovation work its worth whilemconsidering the following points:
• Paying extra for a detailed survey report as this will show you exactly what work is required to bring the property up to standard.
• Aim to get at least 3 quotes in writing.
• If possible get recommendations from friends or colleagues. This is always preferable as if they have had a good experience with a builder then the chances are you will!
• Ask for addresses of properties that the builder has carried out work at; this way you can ‘drive-by’ these properties to view their workmanship.
• Make sure that you make it clear to the builder exactly what work is required, and at what stage they can expect to get interim payments and for how much. Drafting a schedule of works helps to detail exactly what work is required and to what standard.
5. Choose the right building materials for the job. There's a range of alternatives for every eventuality. Some choices are good for your pocket, some are good for the environment and some are just less hassle for your builder.
6. Don't bank on a grant, but do see what's available. Rescuing an empty property meets the objectives of lots of organisations some of them may be prepared to subsidize your costs.
7. Mortgages can be tricky to find if you want to rescue an empty property. The problem is that old wrecks aren't worth much until they are renovated. Many people want to borrow more money for the combined costs of purchase and renovation, than the property is actually worth in its wrecked state. From a lenders point of view this is high risk, because if you default on your payments the property isn't worth enough for them to recover the loan if they repossess the property. Happily, the situation is improving fast.