Buying a flat above a shop: What to consider

There are a number of factors to consider when you are buying a flat above a shop including leasehold management issues, service charges and the shop lease. We take a look.

Angela Kerr Director, Editor

What do I need to consider when buying a flat above a shop?

Here are the factors you’ll need to consider if you’re buying a flat above a shop.

1. The relationship between landlord and tenant

It is important to know whether the freeholder of the flat has granted a lease of the shop.  If so, there is a good chance that if you have problems with the owner of the shop, you can ask your freeholder to do something about it. Your could ask the estate agent this question but make sure your conveyancer confirms the situation.

2. The lease of the shop

In addition to looking at the lease of the flat you are purchasing, it is worth you or, asking your solicitor to, look over the shop lease if possible.  This should identify matters such as:

• What type of shop can be run – consider whether the shop could be used for a purpose which would cause smells or noises or clientele ‘hanging around’ outside, which could be detrimental to your enjoyment of your flat
• Hours of use – check that the shop can only be open between certain hours
• Noise and nuisance issues – look at whether the lease prevents the shop owner from causing noise and nuisance

Be aware however, that if the shop is sold or the shop closes and another takes over, a new lease may come into effect with different agreements. Your conveyancing solicitor will carry out a local authority search to check for any possible changes of use of the business.

When looking for a conveyancing solicitor to progress your purchase, remember to shop around and ask if they have experience of buying residential flats above shops.

Remember that some types of shop or other business may have more of an impact on your day to day life and ability to enjoy your flat than others. Watch out in particular for dry cleaners, restaurants, bars and takeaways, launderettes, pet shops and convenience stores.

Bear in mind that just because you’ve got, say, a nice quiet bookshop below your flat currently which doesn’t cause any problems, doesn’t mean it’ll always be there.

3. Will you have the right to take over the management?

If you buy a flat in a block of flats or a converted house and your freeholder doesn’t maintain the building or perform other obligations under the lease, you may have the right to club together with your fellow flat owners and take over the management of the building or buy the freehold of the building. However, when part of the building is commercial premises, you may not qualify for this right to manage, depending on the ratio of commercial to residential parts of the building.

Under the Leasehold and Freehold Reform Bill, announced in the 2023 King’s Speech, it’s proposed the rules around this are set to change to allow leaseholders in buildings with up to 50% non-residential floorspace to buy their freehold or take over its management (an increase from 25%). Find out more in our article on Leasehold reform: what you need to know about changes to the law. For dedicated expert leasehold advice, speak to our leasehold specialist partner solicitors.

4. Check access and storage

Making sure that your flat has independent access from the street is really important. You will also have to consider whether there is going to be any communal access with the shop or with other flat owners – and if so whether that is acceptable to you.

If you believe that in buying a leasehold flat you have the right to use areas such as storage facilities, a roof garden or communal yard, then make sure those rights are set out clearly in your leasehold conveyancing documents.

5. Parking

Consider what the parking arrangements are:

• Does the flat have its own parking space?
• Could customers of the shop use that space when they pop to the shop or could they block your access by parking on the street outside?

6. Check insurance premiums

If the flat is above any commercial premises which has a higher than usual risk of fire (e.g. a restaurant, fish and chip shop or other takeaway) or security problems, you may find when buying a flat above a shop that your insurance premium is more expensive.

7. How much is the service charge?

Owning a flat in a building with mixed commercial/residential use may mean you could end up with a higher service charge to pay than you would have with a similar flat in a residential-only building. As service charges on commercial buildings are usually more expensive, make sure it’s clear how the service charges are to be divided between you and the shop downstairs before you complete the purchase.

8. Can you get a mortgage on a flat above a shop?

Some lenders are reluctant to offer mortgages on flats above shop which means you may have a more limited pool of potential lenders. So make sure you speak to a fee-free mortgage broker about your options.

It can be more difficult to get a mortgage on a flat above a shop because lenders consider them higher risk. For example, they may be concerned about having fewer interested parties when selling due to potential issues with noise and smells, the shop changing hands and purposes as risk of fire from commercial properties.

9. Lease extension and freehold purchase

Depending on the ratio of the residential space to the shop space, you could find you are not automatically eligible for a lease extension.

And remember, every flat is different so make sure your conveyancing solicitor has plenty of experience of buying this sort of property.

Looking for a solicitor to do the legal work for your leasehold flat purchase? Get instant quotes from regulated and reviewed conveyancing solicitors that cover your area.