ANNEXES

What is an annexe? A bite size look.

Deciding whether a property has an annexe can be an important consideration in underwriting decisions. A concern may arise in the context of the ease of realisation of the security if annexed accommodation is occupied by a third party, and/or third party rights have been granted or acquired, perhaps under a lease.

In a nutshell

Planning guidance defines an annexe as:

Accommodation which is ancillary to the main residential dwelling and used for this purpose. It may be interconnecting within the property as a whole (for instance via doorways) or it may be accessed via a completely separate external entrance, but if it forms separate and additional accommodation from the main house, it will be viewed as an annexe.

Further guidance has been provided by the courts. In Fiander and Bower v HMRC (2021) the Court found that certain conditions must be met to qualify as an annex, and that it must have:

• Its own front door and have some privacy from the main house
• A bathroom
• A kitchen area
• “Facilities for basic domestic living needs”

In order to be characterised as such, it seems less important for an annexe to have its own dedicated metered services, such as gas, water and electricity, but more focus is on it being ancillary living accommodation, domestically separate from the main house.

Other implications

Of course, an annexe may well attract Council Tax, and if it is intended that it should be let for commercial gain, Change of Use Planning is likely to be required – more information can be found in this link: https://www.gov.uk/government/publications/permitted-development-rights-for-householders-technical-guidance. 

Letting an annexe attracts further implications and responsibilities to consider. Of course, permission from the lender will be required; specialist insurance obtained; and there will be tax considerations – and at this stage we are potentially bordering on Buy-to Let territory.

In summary, whilst annexes can play a valuable part in family life, consideration should be given by underwriters of the borrower’s intended use of any annexe to ensure that this is compatible with lender’s expectations.