91¿´Æ¬

Semi-commercial properties offer investors the potential for higher yields than standard buy-to-let properties, but can also present financing challenges. Many mainstream lenders restrict certain property types entirely or require commercial tenants to be in place before they will lend, limiting options for investors and the brokers who support them

91¿´Æ¬ takes a different approach. We assess semi-commercial properties on a case by case basis, lending on property types that other lenders may not. In this guide for intermediaries, we explain the semi-commercial property types the bank will consider, and the key criteria that determine whether a case falls within our lending parameters.

What 91¿´Æ¬ considers semi-commercial

Semi-commercial properties are mixed-use properties that combine residential and commercial space within a single property. These properties generate rental income from both residential tenants and commercial tenants, operating under different lease structures.

Common property configurations we will consider

We provide finance on a wide variety of mixed use property types, including but not limited to:

• Residential flats above retail units, such as shops, restaurants, cafes or takeaways, betting shops or other commercial uses
• Residential units above office space
• Residential flats above pubs, bars or other types of licensed premises
• New build blocks with ground-floor commercial units and residential above

Many mainstream lenders may apply exclusions to pubs, takeaways and properties with vacant commercial units. Common concerns that are cited are usually high hospitality sector failure rates, potential impacts on residential tenants (noise and odour), valuation difficulties and limited buyer pools on resale.

91¿´Æ¬ assesses these property types on a case-by-case basis, rather than applying automatic exclusions. Where the income or property value split meets the 55% residential threshold, we can proceed with applications that may be difficult to place elsewhere.

If you have had issues at other lenders trying to place a semi-commercial case, we may be able to help. Get in touch and join our broker panel using the link below.

Multi-unit freehold blocks (MUFBs)

Many semi-commercial properties fall into the category of multi-unit freehold buildings. These typically comprise 1 – 4 storeys – for example, three floors of residential units above a single ground-floor commercial unit.

The key characteristic is not necessarily the physical configuration alone, but the combination of residential and commercial income streams within one building.

How we classify semi-commercial vs commercial properties

Our threshold for semi-commercial vs commercial finance

The single most important factor in our lending approach for semi-commercial finance is how we classify a property as semi-commercial (and eligible for buy-to-let rates) versus commercial. This classification determines the rates, LTV and criteria that apply.

We classify properties based on the proportion of rental income or property value derived from residential versus commercial sources.

• Above 55% residential income or property value – the property is treated as semi-commercial, and qualifies for buy-to-let rates and criteria.
• Below 55% residential income or property value – the property is classified as commercial, with commercial rates and criteria applying.

How we calculate the split

The split is calculated using rental income percentages or property value and not physical floor space or square footage. A property where the commercial unit occupies only 30% of the floor space can still be classified as commercial if that unit generates more than 45% of the rental income. Additionally, a large commercial unit by floor area that generates less than 45% of the rental income may still be classed as semi-commercial and may be eligible for standard buy-to-let rates if the combined residential rents exceed 55% of the rental income. Likewise, if the property value on the residential element is greater than 55%, then standard pricing applies. If the commercial element is greater than 45%, the commercial pricing applies.

Small variations in rent – whether due to tenant negotiations, rent-free periods, or market conditions, can shift a property across the classification boundary. A property with 54.5% residential income is commercial, one with 55.1% is semi-commercial.

Impact on lending terms

Above 55% residential income, the following criteria applies:

• Buy-to-let loan rates apply
• LTV can be up to 75% of the property value
• We will assess this case using residential lending criteria

Below 55% residential income, the following criteria applies

• Commercial loan rates apply
• LTV can be up to 65% of property value
• Different risk weighting and stricter criteria apply

Vacant commercial units and new build blocks

For properties with vacant commercial units at the time of application (particularly for new build blocks with ground-floor commercial units) we will calculate the 55% threshold using projected commercial rent rather than actual rent received.

We assess projected commercial rent based on comparable rental evidence from similar commercial spaces in the area, the size, location and condition of the commercial unit, and the current market conditions for the type of commercial use.

The residential income must be evidenced with existing tenancies or realistic market rents for let or lettable units. If the projected income split exceeds the 55% residential threshold based on realistic rental assumptions, the property can qualify for buy-to-let treatment even with a vacant commercial unit.

For new build properties, the units must be let already or demonstrably lettable at the projected rents. If the income split meets the 55% residential threshold using realistic rental assumptions, we can proceed with the application.. Likewise, if the property value on the residential element is greater than 55%, then standard pricing applies. If the commercial element is greater than 45%, the commercial pricing applies.

91¿´Æ¬â€™s lending criteria for semi-commercial properties

We will typically consider semi-commercial cases that meet the following criteria:

Property types considered	MUFBs, retail with residential, restaurants/cafes, takeaways, pubs, offices, betting shops, vacant commercial units, new builds, freehold acquisitions
Loan size	Up to £20m
Geographic coverage and exclusions	Included – England, Wales, mainland Scotland Excluded – Isle of Man, Channel Islands
LTV	Up to 75% (>55% residential) or 65% (<55% residential)
Rental coverage (ICR)	125% ICR (limited companies & basic rate tax payers), 130% ICR (foreign nationals), 145% for higher rate tax payers
Security	First legal charge
Borrower types	UK individuals, limited companies, Special Purpose SPVs, trusts, LLPs, partnerships, foreign nationals
Foreign national requirements	UK bank account, UK-based agent
Income assessment	Rental income only, no personal income/tax returns required

Lease structures and management

Managing a semi-commercial property means handling two distinct lease structures.

• Residential tenancies (Assured Shorthold Tenancies/ASTs) are usually on 6-12 month terms. Landlords are responsible for maintenance and repairs, and there are typically shorter void periods when re-letting.
• Commercial leases (Full Repairing and Insurance/FRI) are typically on 3-10 year terms, and the tenant is responsible for repairs, insurance and maintenance. There are usually formal rent review mechanisms, and longer void periods if the tenant vacates.

We assess each income stream differently. For residential income, we require evidence of the AST if the property is already let, or if it is not, comparable rental evidence showing achievable market rents.

For commercial income we review the remaining lease length, rent review provisions and break clauses and tenant covenant strength. A commercial lease with several years remaining and upward-only rent reviews provides stronger income security than a lease approaching expiry, or with frequent break options.

Placing a case with 91¿´Æ¬

Our approach to semi-commercial lending provides intermediaries with a route to market for clients investing in mixed use properties, that may be difficult to secure funding elsewhere.

If you have a case that you feel we may be able to help with, join our broker panel using the link below, and one of our relationship managers will be in touch.