Is the Property You Intend to Buy Suitable for a Holiday Let?

Residential is not the same as holiday let ready

Most people assume that if a lender would happily lend on a property as a home, a holiday let mortgage will follow. It is one of the most common and expensive misunderstandings we see.

Holiday let lenders look at a property through a different lens.

They want to know that it can legally be let to paying guests, that it will keep its value, and that it can be insured and resold without difficulty. A cottage that ticks every box for a residential buyer can fall at any one of these hurdles.

The good news is that most of the deal breakers can be spotted early, often in an afternoon and for around £11. Checking first can save you thousands in abortive legal fees, valuation costs and lost time.

The few words in the title deeds that can stop everything

The single biggest hidden obstacle is the title register.

Many properties carry restrictive covenants, often decades old, that limit how the property can be used. If a covenant prevents holiday letting, lenders will decline automatically.

There is no appeal and no workaround at application stage.

The wording to watch for is usually short and easy to miss.

Phrases such as:

• “may only be used for residential occupation”
• “may only be used as a private dwellinghouse”
• “for use as a single private residence only”
• “not to be used for any trade or business”

To a homebuyer these look harmless. To a holiday let lender, a primary residence restriction like this is a total lending block. Letting the property to a succession of short stay guests is treated as a commercial use, not someone living there as their home.

How to check for under £15

1. Go to the HM Land Registry property search (www.gov.uk/search-property-information-land-registry).
2. Download the title register for the property, which costs around £11.
3. Read the restrictions and covenants sections carefully, including any references to earlier deeds or conveyances.
4. Send us a copy if anything is unclear. We would much rather look at it now than after you have instructed a solicitor.

If the register refers to covenants contained in an older deed, it is worth ordering that document too. The restriction that matters is sometimes buried there rather than on the register itself.

Three more early checks

Leasehold flats and houses

If the property is leasehold, the lease itself may restrict use in the same way a covenant does. Even where the lease is silent, you should confirm in writing with the management company or freeholder that holiday letting is permitted. Many blocks of flats, particularly in coastal and city locations, specifically prohibit short term lets.

London and the 90 night limit

In Greater London, a home can only be let on a short term basis for up to 90 nights a year without planning permission for a change of use. A property capped at 90 nights cannot operate as a genuine holiday let business, so lenders treat London properties without the correct planning consent as unsuitable.

Energy performance

Check the EPC before you go any further. An F rated property is accepted by only two lenders in the holiday let market, which narrows your options and usually your rate. A G rating is generally a decline. If the rating is borderline, it is worth knowing what improvements would lift it to an E or better.

Property types lenders shy away from

Some properties are not ruled out by paperwork but by the way they are built or where they sit. These may be declined outright or need a specialist lender at a higher rate.

Buying a project? Bridge first, then remortgage

A property that needs work is not necessarily a dead end.

A common route is to buy and refurbish using bridging finance, then refinance onto a holiday let mortgage once the property is complete and ready to let. Planning that exit from the start makes the whole process far smoother.

Flood risk and insurance

Many of the most popular holiday let locations are by rivers, estuaries and the coast, which is exactly where flood risk is highest.

Check the property on the government’s long term flood risk service (www.gov.uk/check-flooding) before you offer.

Ideally the property should not be classed as high risk from rivers or the sea. If it is, you will need to answer two questions:

• Has the property ever flooded?
• Can suitable buildings insurance be obtained?

Lenders will want to see that the insurance is on normal terms, which means:

• a standard premium, not a loaded one
• full flood cover included
• a flood excess of no more than £1,000

Even where insurance is acceptable, some lenders may still decline, and valuers can refuse a property based on their own local knowledge. A quick insurance quote at the viewing stage is one of the cheapest pieces of due diligence you can do.

Your pre-offer checklist

• Send us the property link with full details
• Check the EPC and flag an F rating
• Download the title register (around £11) and read the covenants
• Look for residential occupation or dwellinghouse only wording
• If leasehold, get written confirmation that holiday letting is allowed
• If in London, confirm planning consent for short term letting
• Check the construction type against the list above
• Check flood risk and get an insurance quote