Finance for Sui Generis Property

How to Get a Mortgage for Sui Generis Properties

If you own or are buying a property that sits outside the usual planning use classes, hopefully this page will be useful to you.

What sui generis means in practice

Sui generis is a planning term used when a property does not fall under the usual use classes. In a housing context, a common example is a large HMO with seven or more unrelated occupants who share facilities.

In the commercial world it can include venues such as nightclubs, hot food takeaways, betting shops, and fuel stations. It can also cover buildings adapted so extensively that they no longer function as a standard single dwelling.

For finance, the label matters because lenders want to know how the property is allowed to be used, whether it complies with local rules, and how easily it can generate and sustain income. You do not need to be an expert in planning to raise funds, but you do need to hold the right permissions and be able to evidence them.

When you might need finance

You may be seeking funds for one of the following reasons:

• Purchase of a property that already has sui generis use
• Refinance of an existing asset to release capital or move to a better rate
• Works to convert an ordinary dwelling to a large HMO
• Change of use for a unique commercial site
• Light or heavy refurbishment where the end use will be sui generis

You might use bridging to acquire and carry out works, then switch to a term mortgage once planning, licensing, and income are in place. Each situation is different so you should take professional advice.

Planning permission and licensing essentials

Planning and licensing sit at the heart of any successful application. Some lenders may be able to get comfortable with non standard properties when the paper trail is clear and current.

Large HMO basics

A large HMO normally means seven or more unrelated people sharing facilities. Most councils require a licence for large HMOs. Lenders will ask for evidence that the property has the correct planning status and the appropriate licence or that you can obtain it at completion. Expect requests for floor plans, room sizes, amenity schedules, and proof of compliance with fire safety measures that match local guidance.

Article 4 and change of use

Many areas operate an Article 4 Direction that removes permitted development rights for small HMOs. Large HMOs require planning for sui generis use in any case. If you plan to convert, you will usually need full planning consent before a term lender will complete. Bridging is often the tool of choice during the planning phase and the works, but this will depend on the full circumstances.

Evidence lenders may ask for

• Planning decision notice or Certificate of Lawful Use
• Current or draft HMO licence and licence conditions
• Fire risk assessment and confirmation of installed protection
• Electrical and gas safety certificates, plus any required inspection reports
• Tenancy information if let, including rent schedule and deposit arrangements

Finance routes at a glance

There is no single best product for all sui generis cases. The right route depends on where you are in the journey and what the exit looks like, so it would be wise to speak with a professional mortgage adviser so they can gather the full details, to then explore your options for you.

HMO mortgages

Once planning and licensing are settled and rooms are lettable, a specialist HMO mortgage can provide competitive pricing with options for interest only or capital repayment. Affordability often relies on rental stress tests. In many cases lenders assess the gross rent per room and apply an interest coverage ratio. Experience as a landlord is valued, but first time HMO investors can still be considered with the right support and a strong plan.

Bridging finance

Bridging loans are designed for speed and flexibility. They can fund a purchase prior to planning approval, cover refurbishment or reconfiguration work, or help you move quickly where term lenders are not yet ready. The key to bridging is the exit plan. This might be refinance to an HMO or commercial mortgage once the property reaches the required standard, or a sale if you are trading the asset. Kerr and Watson will model the exit and ensure the numbers stack up.

Commercial mortgages

For properties that trade as unique venues or cannot realistically be sold as standard housing, commercial mortgages may be the best fit. Pricing is set by risk and by the strength of income. Lenders consider location, local demand, trading history, and the robustness of leases or management arrangements. Some will lend to new operators with a credible plan, while others prefer seasoned applicants. We will match your profile to the right panel.

How lenders assess value and risk

Sui generis assets are frequently valued by reference to income rather than only brick and mortar. Two ideas are useful

Income based valuation

The valuer looks at market rents per room or per unit, adjusts for realistic voids and costs, and derives a yield. The stronger and more stable the income, the higher the supported value is likely to be.

Brick and mortar valuation

If the property could in theory sell to a family buyer with modest works, valuers may use comparable sales of houses nearby. This can limit the loan if the market treats the asset as a house rather than a trading investment.

Expect a lender to choose the method that aligns with how they would sell the property if they ever had to enforce.

Eligibility and documents that help your case

You do not need a stack of paperwork to start a conversation, but a well prepared file speeds things up and can unlock better rates. Useful items include

• Identification and proof of address
• Background on your property experience and the management setup
• Planning and licensing documents as noted earlier
• Floor plans with room dimensions and amenity counts
• A schedule of works if you are converting or improving
• A rent schedule with actual or projected rents per room
• Latest bank statements and company accounts where relevant
• Details of any limited company structure and ownership

Common pitfalls and how to avoid them

Unclear planning status

If there is any doubt about use, obtain written confirmation from the local planning authority or a planning consultant. Lenders want certainty.

Over optimistic rent projections

Base figures on local comparables and current demand for the specific room standard you are offering. We will cross check the market to keep expectations realistic.

Fire safety gaps

Ensure alarms, doors, and escape routes meet local guidance. Photographs and a recent assessment reduce questions.

Exit risk on bridging

Your exit should be practical and timed with a margin for contingencies. We will map a route that works even if things take longer than hoped.

potential scenarios

Conversion with planning pending

You have an ordinary house and plan to create an eight room HMO. Planning for sui generis use is not yet granted. Bridging funds the purchase and works. Once planning and licence are in place and rooms are let, you refinance to a term HMO mortgage. The exit reduces the rate and releases any uplift in value to recycle into your next project, presuming this is available.

Refinance of an operating large HMO

You own a seven room HMO with stable occupancy. You want a better rate and some capital for improvements. We place the case with a lender that assesses income per room and accepts your local licensing framework. The new facility reduces monthly costs and provides funds for upgrades that may raise rent and value.

Unique commercial site with trading income

You are buying a property used for a specialist activity that sits firmly in sui generis. The business has accounts and a lease. We approach a commercial lender that values on income and is comfortable with the use. Terms reflect the lease strength and your track record.

Conclusion

Financing a sui generis property can be achievable when you combine the right product with the right situation.

Whether your project involves a large HMO, a short term conversion plan that needs bridging, or a distinctive commercial site, lenders may be able to back a well evidenced case with a clear exit.

If you are considering a purchase, a refinance, or a conversion, get in touch with Kerr and Watson today.