Property lending criteria | Barclays Intermediaries

• The Building Safety Act 2022 provides protection from the remediation costs of replacing external combustible material where there is an agreed approach to remediation in place.
• Buildings that have external wall systems may require an EWS1 rating. Where a rating is A3 OR B2 this indicates some form of remediation is required.  
• There are a variety of options available to leaseholders and Barclays made a commitment to help customers living in or buying impacted properties where there is a qualifying lease or planned remediation in place by a recognised body.
• To support applications for impacted properties that require remediation we will need one of the following to be provided to us with your client’s mortgage application.
  • Written confirmation of intention to complete the works from a developer who has signed a contact with the government. You can see a full list of developers who have signed the pledge on .GOV.UK
  • A Building Safety Act 2022 Government Leaseholder Deed of Certificate Form accompanied by a Building Safety Act 2022 Landlords Certificate
  • Written confirmation from a housing association confirming they are completing the remediation or written confirmation from DLUHC confirming the property is approved for funding to remediate. For letters from DLUHC, these should clearly state if any financial liability is passed to the leaseholder or be accompanied by a leaseholder or landlord certificate.
• Where your client provides the Landlord and Leaseholder certificates it is important to capture the financial commitment they will have. You can find the total sum payable on the landlord certificate within the “work undertaken on relevant defects” section.
• Any amount the client must pay will be taken over a 10-year period. Therefore, the amount due on Monday 14th February 2022, should be divided by 120 months and captured as or within the service charge to ensure affordability is met.
• Developer or Housing Association remediated properties will have no financial liability passed to the leaseholder and therefore will not impact affordability.
• Please note: if the application is for a property that requires fire safety remediation we will only proceed where we have satisfactory evidence in the format/s detailed above. In the event this cannot be provided we would be unable to support your customers mortgage application at this time.
• For customers who already hold their mortgage with Barclays against a property that requires remediation we can support rate switch applications, permission to let requests and conversion from BTL to residential or vice versa without evidence being required. Where any additional borrowing is required for existing customers, the rules detailed would apply.

As part of their affordable housing obligations, local authorities, housing associations and private developers or house builders may offer properties for sale at a discount, set at a percentage of open market value – for example, 80%. This discount may apply in perpetuity which means that, for subsequent sales, the owner must sell the property at the same discount based on the open market value at that time.

The discount arrangement is usually under a ‘section 106’ restriction. Discounted market sales are acceptable provided this restriction does not apply to the lender who may sell the property at open market value, this is known as a mortgagee in possession clause. The maximum nomination period we accept is 3 months.

Maximum 85% LTV based on the discounted sale price. Where there is a section 106 agreement, the LTV must not exceed 80% of the open market value (not the discounted sale price).

A property is classified as 'mixed use' if there is any element of commercial use – ie, it is used in part for non-residential purposes, such as a shop, doctor's surgery or office. This includes situations where the property itself is wholly residential but there is a commercial use of adjoining/surrounding buildings or land included in the mortgage security – such as stables or sub-let cottages.

The decision to lend will be based on:

• Whether or not the property is identifiable as a residence
• Whether or not the property is saleable as a residence
• Whether the property is classified as residential under planning legislation
• The value of the property as a residence

All mixed-use properties fall outside of standard policy and will be assessed by an underwriter on their individual merits.

In all cases, the local authority planning classification must be solely residential.

Please note that properties classed as ‘Live/Work Units’ are not acceptable for either Buy to Let or Residential lending.

At least 40% of the property must be used as the applicant's main residence and the remainder must be used exclusively by the applicant for their own business purposes.

Mixed-use properties are limited to 80% LTV and certain commercial uses will not be considered:

• Fast food or sandwich shops
• Care homes
• Kennels
• Catteries
• Caravan Parks
• Working Farms

Mixed-use properties are not acceptable for Shared Ownership/Equity nor Buy To Let.

Further standard lending conditions will apply to mixed-use properties. Please refer to our lending criteria pages for more details.

For Residential and BTL lending purposes the definition of a new build is a property that was first registered 2 or fewer years ago and the property is subject to first sale by the developer, regardless of time or any rental usage in the interim. This may be because the property is a new construction, a conversion or a renovation from an earlier use. 

Builder’s deposit and incentives

Builder financial incentives are acceptable provided the incentive does not have to be repaid and the builder/developer does not intend to register a charge against the property.

It is acceptable for financial incentives to be used towards funding the deposit, provided the borrower is funding at least 5% of the purchase price from their own funds (this may include a gift from a relative).

Where the combined value of any financial incentives exceeds 5% of the valuation (or purchase price where lower), the amount of the incentive greater than 5% will be deducted from the valuation (or purchase price where lower) and the LTV, for the purposes of calculating the maximum loan amount, will be calculated based on the resultant value: 

Example (new build house):

*Refer to current criteria for the prevailing maximum LTV

Upgrades forming an integral part of the property would not be considered as a part of the 5% cash incentive threshold. Examples of these would be:

• White goods (where not included as standard specification)
• Floor coverings
• Integrated lighting (downlighters)
• Kitchen upgrade, including tiling and worktop
• Bathroom upgrade
• All electric upgrade – i.e. additional sockets, TV points, etc.
• PV (photovoltaic) panels
• Turfing/landscaping

In all instances where there is an incentive being offered, the applicant(s) must provide full details of the type and amount as part of the application submission and all such incentives must be declared to the valuer on the UK Finance Disclosure form in order that they can be taken into account when valuing the property. 

Offer validity

A mortgage offer is valid for six months from the date we receive the application.

New-build property sales are often agreed off plan, or in the early stages of development. As a result, completion might take longer than six months. If an offer doesn’t complete within six months, we can usually extend it for another six months without the need for you to submit the status documents again.

We’ll only be able to extend the offer period with confirmation that the customer’s circumstances haven’t changed significantly since the original application was submitted – you’ll need to confirm this using the New Build Mortgage Offer Extension form. We’ll also need to assess the application again against current lending standards, and carry out a new credit search. 

If there’s been a significant change to the customer’s circumstances, we’ll need to carry out a full underwriting assessment, including a status assessment. We might need to offer the customer a different mortgage product. The customer will need to cover all costs involved.

Second properties

If a customer already owns a property (and they’re not selling that property), our maximum LTV is 80%. Under specialist schemes like Help to Buy, a customer won’t be able to buy a new property if they own any other properties (including residential, buy to let or held-on-permission to let).

Sub-sales and sale contract reassignments

Sub-sales or sale contract/lease reassignments happen if a new-build property is currently contracted for sale to a third party and hasn’t yet completed.

These are acceptable as long as

• The valuer we instruct is aware of the nature of the transaction
• The LTV is 70% or less of the purchase price or valuation, whichever is lower
• The total mortgage lending is less than the contracted sale price to the third party 
• We have evidence that all deposit funds are either from the applicant’s own resources, a gift from a relative, or a combination of these
• There’s no family or other relationship between any applicant and the seller or third party

We’ll decline any transaction that doesn’t meet all of these criteria.

More information about new builds

We are happy to consider a mortgage for an applicant who has existing properties (whether mortgaged or unencumbered).

Where the applicants have an existing/second residential property that has not been sold and there is reason to believe is not to be sold before completion (includes where held/to be held on a PTL basis), an application is acceptable subject to a maximum LTV of 80% applying to the property being purchased providing:

• The new property being purchased is for owner occupation or will be occupied by a dependent relative* of the applicant
• The property being bought is not that being sold by a dependent relative who will then remain in the property after the sale takes place. If this is the case, then the application must be declined
• Any dependent relative must be occupying the property rent free

* ‘Relative’ or ‘Partner’ is defined as ‘The borrower’s spouse or civil partner; a person (whether or not of the opposite sex) whose relationship with the borrower has the characteristics of the relationship between husband and wife; or the borrower’s parent, brother, sister, child (including stepchild), grandparent or grandchild.’

Additional borrowing and remortgages can be considered where any additional funds are for essential home improvements.

Where any existing property is held on a Buy to Let basis, it is acceptable to consider lending up to a maximum LTV of 90%.

If the mortgages held are on a Buy to Let (BTL) or Permission to Let (PTL) basis, then the contractual monthly payment will be treated as commitment when assessing affordability (rental income should be evidenced as self-employed income).

For background Buy to Let Mortgages, you will need to provide one of the following

• A copy of the original BTL mortgage offer 
• A letter from the lender confirming it is a BTL. If they hold any Woolwich/Barclays BTL mortgages, simply detail the account numbers for us

For background PTL Mortgages you will need to provide

• A letter from the lender confirming this

Where the original loan can NOT be confirmed on a Buy to Let or Permission to Let basis

• Any existing mortgage or secured loan which has not been evidenced as a Buy to Let/Permission to Let and will not be redeemed on completion of the new mortgage will be treated as follows
• For affordability purposes, the mortgage commitment on second properties will be calculated on a standard repayment basis over the outstanding mortgage term at the pay-rate or our stressed rate, whichever is the higher. Where a credit limit applies to the existing mortgage borrowing then it is this figure, including any undrawn monies, which should be used when assessing affordability 
• In addition, a fixed value commitment for each additional residential property needs to be applied to cover all other property costs. This is applied automatically by the system for residential mortgaged properties documented in the application
• Advisers need to add actual costs for non-mortgaged properties. This applies to all other residential properties, such as second residential homes, but not any property confirmed as being on a Buy to Let or Permission to Let unless the property is empty at the time of application and the landlord is responsible for paying costs associated with the vacant property (such as council tax and service charges)

Acceptable warranties include:

• ABC+
• Advantage/ Advantage Home Construction Insurance (AHCI) (Only warranties underwritten by CGICE)
• ARK 10 Year Structural Defects Insurance
• Build Assure (New Homes Structural Defects Insurance)
• Build-Zone Structural Warranty (including Build-Care
• CADIS
• Checkmate Castle 10 New Home Warranty
• Global Home Warranties 10 Year Structural Defects Insurance
• Protek,
• Home Proof (previously AEDIS Warranties Ltd) (Only warranties underwritten by Millenium, SCOR or Titanium Insurance Company)
• ICW (International Construction Warranties)
• LABC New Home Warranty
• NHBC
• One Guarantee
• Premier Guarantee
• Q Policy/ Q Assure

CRL (no longer trading): Policies backed by Casualty and General, or ARK are still acceptable.

BLP: Policies underwritten by AGCS for business accepted by BLP up to 27th November 2020 are acceptable

Retrospective new build warranties and PCC’s are not acceptable

Where a PCC is being used in place of a warranty:

• The property must be built under the supervision of an Architectural Technologist or qualified Surveyor who has professional indemnity insurance and is employed solely by the applicant, a builder or a self-build group;
• The Certificate must be in in the exact words and format as set out in UK Finance Lender Handbook section 6.7.4;
• A retrospective PCC is not acceptable 
• The individual signatory to the PCC must meet the qualification criteria as set out.in UKF lender Handbook 6.7.4 & 6.7.5
• The development must be of a no more than 5 properties;
• Where, by exception, a high-quality small-scale development covering more than 5 properties (max 10) is presented, separate approval to proceed must be secured. Please contact the support team on 0345 073 3330
• PCC certification is not acceptable on individual properties in a large development scheme;
• A property with a PCC certificate, which is not complete at initial inspection, will require a final inspection prior to completion;
• A retrospective PCC is not acceptable
• A PCC from a warranty provider company that is not on the above approved list is not acceptable.
• PCC’S are not acceptable covering flat developments

Overage is an agreement in which the seller can obtain a portion of the future value of a property. This increase in value can be attributed to a future development. Where a property is sold to a buyer, and it’s worth more when the property is sold on, the seller may be entitled to claim back some of the difference in sales prices. For this to happen, the value needs to have increased for one of the reasons set out in the overage deed – for example, the land has planning permission.

‘-Negative-’ overage can apply where the buyer covenants with the vendor on the sale of the property that, eg, no development will take place on the property that the vendor does not permit or without the vendor’s consent.

To ensure the vendor gets the benefit of the overage payment the deed is usually secured by any or all of the following methods: a charge or restriction secured against the property, a direct deed of covenant or a guarantee.

They are usually very complicated arrangements and are have sometimes been found to contain defective drafting.

It is not acceptable to lend to new customers where there is an existing Overage agreement or where it is intended to create one on completion of the purchase/re-mortgage.

There are some property types which are not deemed suitable security for the Barclays Group and so in all cases lending will be declined. These scenarios are listed below:

• Demolish and rebuilds
• Freehold flats and maisonettes
• Properties classed as ‘houses in multiple occupation’ where a licence from the Local Authority is required
• Live-work units

Some properties may have certain features which mean that extra care will have to be taken. In these cases please contact the Intermediary Support Team for further details on our lending policy:

• Contaminated land – typically from previous industrial use of the site
• Adjoining flats (granny annexe) – each case will be looked at individually
• Japanese Knotweed – please see separate policy section
• Agricultural restrictions – our policy position will depend on the extent of the restrictions
• Modern methods of construction – will require an individual assessment by a valuer
• Easiform cavity walled concrete – properties built before 1965, those with visible cracks or where adjoining properties are deteriorating will be declined
• Flats over shops/commercial premises – each case will be looked at individually
• High-rise blocks of flats/ Deck Access - Properties with deck area access can only be considered for good quality developments with no restriction whatsoever on mortgageability/saleability. Properties that have non-decorative timber cladding will be looked at individually.
• Mixed-use properties – please see 'Mixed-Use policy' page
• Section 106 properties- each case will be looked at individually depending on section 106 requirements. Please refer to S.106 agreement (S.75 in Scotland)
• Early steel frame construction – not normally considered suitable security but may be looked at by a surveyor if a Structural Engineer’s Report is obtained. Please contact the Intermediary Support Team for extra information

The above lists are not exhaustive. Please contact the Intermediary Support Team for further details.

In Scotland, we will attempt to generate an Automated Valuation (AVM) for properties that fit the Barclays criteria. We will alternatively accept a transcript of the Mortgage Valuation provided as part of the Single Survey report (when the customer wishes to use one), as long as the surveyors are on the Barclays panel. However, AVMs or transcripts do not apply to Scottish New Build properties where we will instruct a valuation as part of the mortgage application process (a survey fee will be payable only for properties above the £2M threshold, please see our Tariff of Charges for further details).

For more information on Barclays approved surveyors in Scotland please contact 0345 073 3330*

Scottish Surveyor Panel List

Please see the list below for the Scottish Surveyors who are on our approved panel.

Barclays Panel List

• e.surv
• J&E Shepherd
• Allied (Scotland)
• Graham & Sibbald
• Walker Fraser & Steele
• D M Hall
• Harvey Donaldson & Gibson

First Surveyor Group:

• First Surveyors Scotland
• Barr Brady
• Stephen J Ormand
• Buccleuch John Sale
• David Adamson & Partners
• Gabriel & White
• Torrance Partnership
• Dixon Heaney
• Whyte & Barrie
• Samuel & Partners
• Hardies
• Murray & Muir

Note: In Scotland it is essential the home report is dated within the last 90 days prior to the application being submitted in order to be acceptable.

The valuer must be able to value the property on a residential basis ignoring any possible business usage.

Right to buy pre-emption clauses giving the council first rights for an onward sale within the first 10 years are acceptable.

If the valuation is satisfactory then the property will constitute suitable security if ALL of the following requirements are also met:

• The maximum LTV is the lower of 80% of the open market value or 85% of the purchase price.
• S.106 agreements must contain a mortgage exclusion clause to protect the mortgage in the event that the registered provider defaults.

Restrictions on re-sale/disposal

The S.106 agreement may stipulate that the Local authority has the right to nominate a buyer (meeting defined eligibility requirements) when the property is sold or disposed of.

Discount market sales will typically have a S.106 present to ensure the discount remains for future sales, these are acceptable provided there is a mortgage in possession clause.

Where the restriction includes a nomination period, these are acceptable provided the nomination period is no more than 3 months.

Transactions at undervalue can occur where a property is being or has been acquired by way of a Deed of Gift, or for less than the full market value. For such a transaction to be acceptable to Barclays the vendor must be a relative of the applicant or the applicant’s landlord.

Where an Advisor is aware that a mortgage request is to be a transaction at undervalue, Mortgage Services must be notified at initial application stage to ensure the scenario is acceptable based on the above relationship requirements.

In such cases problems may arise under the Insolvency Act 1986. Under Section 339 of the Insolvency Act 1986, a trustee in bankruptcy has the right to apply to the Courts to set aside a transaction at an undervalue, if the transferor subsequently becomes bankrupt within 5 years of the date of the transfer.

The period during which the transfer can be set aside is reduced to 2 years if a Declaration of Solvency is obtained at the time of the transfer and the transferor does not become insolvent as a result of the transaction.

Where it is confirmed that the applicant is purchasing their property at an ‘undervalue’ as defined above, a minimum deposit of 5%, based on the lower of valuation or discounted purchase price, must be provided from the applicant’s own resources. It must be confirmed that the property being bought is not that being sold by a dependant relative who will then remain in the property after the sale takes place. If this is the case, then the application must be declined.

The above deposit requirement does not apply to Springboard Mortgage transactions where a minimum 5% deposit is required based on lower of valuation and discounted purchase price with a further 10% cash deposit to be held in line with standard requirements applicable to a Springboard Mortgage Product.

Customers can appeal against Valuations where the following apply

For remortgages and further advance cases, where there is more than a 25% variance between the customer’s estimated value and the actual valuation provided by the Bank’s nominated valuer.

For purchase cases, where there is a variance of more than 10% between the purchase price and the valuation.Appeals can only be considered when submitted against a physical valuation (i.e. not an AVM).

This applies to both Residential and Buy to Let cases.

Appeals can only be considered when submitted against a physical valuation (i.e. not an AVM).

If your customer wishes to appeal the valuation in line with the guidance above, you will need to contact your Barclays Support Team or email mailto:brokersupport@barclays.com. An appeals form will be issued and you will be required to supply 3 comparable properties sold in the last 6 months.

To be able to lend on a property, Barclays requires a valuation to be carried out. When you apply for a Barclays mortgage, the valuation type depends on whether your mortgage will be on a residential or Buy to Let basis.

The mortgage valuation is our standard report for all residential applications and includes a description of the property, an opinion of the market value of the property as at the date of inspection, and an estimate of the current cost to reinstate the property in its present form (where appropriate).

It’s important to remember that the mortgage valuation is a report which is primarily for Barclays’ purposes and confirms whether the property is suitable security for a mortgage – it is not a survey. As such, we ask that all clients consider instructing a separate survey to provide them with a more detailed assessment of the condition of the property, especially when an AVM has been accepted for lending purposes.

Your client may wish to contact Countrywide Surveying Services on 0800 012 6995, e.surv Chartered Surveyors on 0800 169 9661, or any other provider to discuss the different survey options available. More information on the types of survey available can be seen found on the ‘Home Surveys’ section of the Royal Institution of Chartered Surveyors website.

Please note that if your clients do instruct their own survey, this will be a separate contract between them and their chosen survey provider with separate fees applying. Barclays will always rely on the mortgage valuation for the purpose of agreeing the mortgage.

Automated valuation model (AVM)

For remortgages on properties up to £1m in value (up to £2m in London and South East), where the loan to value required is 80% (subject to product availability) or less.
For purchases on properties up to £1m in value (up to £2m in London and South East), AVMs can be used on any LTV (subject to product availability).
We use AVMs to assist with instant mortgage decisions. Whether you apply through MAX or via other online systems*, the use of AVMs will help speed up the decision and offer a better process for your customer. Where an AVM is not provided an alternative valuation will be undertaken.
AVMs are only suitable for further borrowing where the latest valuation was a physical one and not an AVM.
In all further borrowing cases where the latest valuation was an AVM, a Non-Disclosed PRA valuation must be requested.
* For example, via MTE or Trigold.

Japanese Knotweed

Japanese Knotweed is an invasive plant introduced into the UK and has no natural predators. The plant is known to exploit existing weaknesses in buildings. Applications where Japanese Knotweed is identified should be looked at in accordance with the following requirements:

CATEGORY 4
Japanese Knotweed is within 7 metres of the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding, either within the curtilage of the property or on neighbouring land;
and/or
Japanese Knotweed is causing serious damage to permanent outbuildings, associated structures, drains, paths, boundary walls and fences.

To be reported in the valuation report together with a valuation of the property. Further investigation is required. This is to be undertaken by a Property Care Association (PCA) registered or similarly qualified firm. All recommended remedial works must be covered by an insurance backed guarantee. The guarantee must be for a minimum of 10 years, be property specific and transferable to subsequent owners and any Mortgagee in Possession.An insurance backed treatment plan must be confirmed prior to completion. It is not necessary for the recommended remedial works to be completed prior to the release of any mortgage monies.

CATEGORY 3
Japanese Knotweed is present within the curtilage, but is more than 7 metres from the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding. 

Report this in the valuation together with a valuation of the property. No further investigation or action is required.

There is damage to outbuildings, associated structures, paths and boundary walls and fences and this is considered minor.

Report this in the valuation together with a valuation of the property. Further investigation is required. This is to be undertaken by a Property Care Association (PCA) registered firm. All recommended remedial works must be covered by an insurance-backed guarantee. The guarantee must be for a minimum of 10 years, be property specific and transferable to subsequent owners and any mortgage in possession.

An insurance-backed treatment plan must be confirmed prior to completion. It is not necessary for the recommended remedial works to be completed prior to the release of any mortgage monies.

CATEGORY 2
Japanese Knotweed is not seen within the boundaries of the property, but it is seen on a neighbouring property or land. It is within 7 metres of the curtilage of the subject property, but more than 7 metres away from the main building, habitable spaces, conservatory and/or garage and any permanent outbuilding.
To be reported in the valuation report together with a valuation of the property. No further investigation or action required.

CATEGORY 1
Japanese Knotweed is not seen at the property, but it can be seen on neighbouring property or land where it is more than 7 metres away from the curtilage of the subject property.
To be reported in the valuation report together with a valuation of the property. No further investigation or action required