Buying a holiday home in the UK is an appealing prospect for many reasons, from personal leisure and family retreats to the potential for generating rental income. It provides a convenient and comfortable base for staycations, offering a welcoming space where families can unwind and enjoy quality time together.
The UK offers a wide array of desirable locations for holiday home ownership, with regions such as Cornwall, Devon, Dorset, and the Lake District consistently ranking among the most sought-after. However, the purchase of a holiday home requires careful consideration of legal, financial, and practical factors to ensure the investment meets your personal and financial goals.
Many properties are subject to restrictive covenants which are legal obligations that limit how the property can be used. The property may be subject to covenants preventing its use as a holiday let or limiting lettings to certain times of the year.
Additionally, properties may be subject to Section 106 agreements or other planning restrictions and conditions that restrict use to local residents or seasonal occupancy only.
In many coastal towns—including Cornwall and Devon—where housing markets are under pressure from second homes, Airbnb short-term lets, and holiday parks, local authorities may implement Article 4 Directions. These remove permitted development rights, meaning planning permission is required to change the use of a property from residential to short-term holiday letting or commercial use. Failure to obtain the necessary planning permission can result in enforcement action.
When purchasing a property to be used as a holiday home, it is important that your solicitor carefully reviews the title documents and relevant searches to identify any such restrictions and determine whether the property can legally be used as a holiday home.
If letting the property out as a holiday home, it is essential to obtain appropriate holiday let insurance. It is advisable to secure a draft insurance policy before proceeding with the purchase to understand any additional costs or premium increases, particularly for properties located in coastal areas where risks such as weather-related damage may be higher.
Some local councils require owners of short-term holiday lets to obtain a specific licence or registration before letting their property. It is important to verify whether such licensing requirements apply in the relevant jurisdiction.
Additionally, the property should have up-to-date health and safety certifications, including a valid Gas Safety Certificate, a Fire Risk Assessment and an Electrical Installation Condition Report (EICR), to ensure compliance with legal obligations and to safeguard the well-being of occupants.
Regular maintenance, services and documentation are essential to ensure safety and avoid legal liability.
If you are considering buying the property with a mortgage, it is important to choose a lender that permits holiday lets or short-term rentals, as not all mortgage providers allow this use.
It is advisable to consult with a mortgage broker to determine whether you require a holiday let mortgage or a buy-to-let mortgage, ensuring that your financing aligns with your intended use of the property.
It will not be suitable to arrange a buy-to-let mortgage if you intend to occupy the property at any stage.
Leasehold holiday apartments are very common. However, they typically include additional ongoing costs such as ground rent and service charges. Furthermore, the lease may contain specific restrictions on letting the property on a short-term basis, which should be carefully reviewed before purchase.
The freeholder or landlord will arrange the buildings insurance for the property as a whole. It is important to consider whether the insurance policy adequately covers the use of the property as a holiday let, as coverage may be limited to exclude short term lets or use of the property as an Airbnb.
It is important to consult with a qualified accountant prior to proceeding with the purchase of a second home to fully understand the potential tax implications, including the availability of any applicable tax reliefs and the impact of Capital Gains Tax on the sale of the property.
Additionally, purchasers should be aware that the higher rate of Stamp Duty Land Tax will be payable on second homes and additional residential properties in England which may significantly affect the overall cost of the acquisition.
Purchasing a holiday home in the UK can be a rewarding investment and lifestyle choice, but it requires careful due diligence. It is therefore important to appoint a solicitor and other professionals to assist with the process. At Michelmores, our team of experienced solicitors regularly handles holiday home purchases, particularly in rural and coastal areas, and we are well-positioned to assist you throughout your transaction.
