Semi-commercial in London: the shop with flats above, and the question to settle on day one

Walk any London high street and you are looking at the asset class. Ground-floor retail or Class E, two or three self-contained flats above, usually held freehold, usually let. It is the most common semi-commercial building in the capital and it produces the same conversation every time.

Settle the occupation question first

Before the price, before the lender, before anything.

If you or an immediate family member will occupy one of the flats, the deal can fall inside the FCA regulated mortgage perimeter. At that point it stops being a case we can act on, and we refer it to a regulated firm. Commercial mortgages are unregulated lending and we do not hold FCA authorisation, because the products we arrange are unregulated. That is a normal position for a commercial broker rather than an unusual one, but it means the occupation question has to be answered honestly on the first call and not discovered at valuation.

If nobody connected to the borrower is going to live in the building, the deal sits cleanly on the unregulated commercial side and the rest of this post applies.

The floor area split

Lenders set their own thresholds on the proportion of residential to commercial floor area, and those thresholds decide which desks will quote. Some will go to 70% residential. Some stop at 50%. Some are more interested in the income split than the area split.

Get the areas measured properly rather than estimated from the particulars. A building you believe is 55% residential and which measures at 68% will have a materially different lender shortlist, and finding that out three weeks in wastes three weeks.

What supports 75% LTV

The reason semi-commercial reaches 75% where a pure commercial investment case might cap at 70% is structural. A specialist semi-commercial desk underwrites the two income streams separately, applying different stress assumptions to the commercial lease and to the residential tenancies, then blends the result. The residential income is generally treated as more reliable and less cyclical, which pulls the blended cover up.

A borrower who assumes all rent is counted equally at the same stress rate will build a model that does not match any lender's, and will be surprised by the decline.

Pricing sits at 6.5 to 8.5% pa on the mid-2026 band, with the sharp end reserved for a long commercial lease to a covenant tenant and fully compliant residential units.

The income pack the underwriter will want

• The commercial lease in full, with any licences, side letters and rent deposit deed
• Every residential tenancy agreement, with deposit protection evidence for each
• Rent receipts or bank statements evidencing the passing rent actually arriving
• An EPC for each unit, commercial and residential
• Gas safety and electrical installation condition reports on the residential units
• Any service charge or management arrangement

Flag EPC ratings on the let residential units up front. A sub-standard rating is a condition the underwriter will raise anyway, and answering it before it is asked is faster and cheaper than answering it afterwards.

The stamp duty point

A genuinely mixed-use building is assessed for Stamp Duty Land Tax entirely on the non-residential rates rather than the residential scale, with no additional-dwelling surcharge. For a London investor buying a parade building, that is a meaningful difference against buying the equivalent value in flats, and it is one of the reasons the asset class holds its appeal. Rates and bands are set by the Treasury and change at fiscal events, so confirm the current position with your solicitor or accountant rather than with a blog post.

Where the stock is

Outer and inner London parades are where this asset lives, and the market-temperature reading in those boroughs has been steadier than prime central. Using HM Land Registry residential price paid data purely as a temperature gauge, and never as commercial evidence, the 12 months to May 2026 showed Waltham Forest up 4.6% at a £550,000 median and Croydon up 1.4% at £428,000, against Kensington and Chelsea down 11.3%. Parade stock in the outer boroughs is not being repriced the way prime central is.

One thing that will decline

A residential buy-to-let application over a shop with flats above. It is not a buy-to-let. It is a semi-commercial mortgage, it goes to a different set of desks, and applying for the wrong product costs you a credit search and a fortnight.

Send us the floor areas, the leases and the tenancy agreements, and we will confirm the regulatory position and the likely LTV before anyone instructs a valuer.