Owning a listed building, whether as a home or business premises, allows you to enjoy a piece of UK heritage, but can bring challenges too. As well as strict rules on maintenance and repairs, you need to seek consent from your local planning authority to make alterations, which can cost time and money. Given the quirks of these properties and the nature of repairs, buying a listed building, let alone doing any work to it, can seem daunting.

Up for the challenge

John McNulty, chef patron at The Taynuilt: Etive Restaurant with Rooms, based in Argyll, faced all of these challenges and more when he purchased the premises in December 2012. When bought, the property was a traditional coaching inn but previously had been a farm and even a petrol station. It gained its listed status in the 1970s, with the Scottish category B listing confirming its regional importance. “There’s been a building on the site since the 1600s and the rest of the village has grown up around it,” explains John. “We were able to buy it at a reasonable price, but it really wasn’t in a very good state. The banks laughed at us when we asked for a loan but we could see the potential so we funded it ourselves.”

Into the unknown

John decided to carry on without seeking professional advice, so wasn’t as prepared as he could have been for the challenges ahead.

Years of neglect meant the building needed more than just a lick of paint. “The kitchen would never have passed the health and safety regulations. The equipment was so tired it would have gone up in flames if we’d used it,” says John. “We also found the 14 electric showers in the rooms were being run into a normal domestic consumer unit. This was dangerous.”

Straightening out these issues is one thing, with John having to spend around £150,000 to get the plumbing and electricity up to a safe standard, but the building’s listed status added to the complexities. “The planning side is horrendous. Whenever we want to make a change we have to apply for listed building consent. We’ve spent ages waiting for the planners to approve work and we’ve fallen out with them on some occasions,” he explains. “Approval for our biomass boiler took so long we had to reapply for it.”

The building’s listed status means some jobs are just too expensive to contemplate. “If we wanted to replace the windows we would need to submit drawings and get a warrant for each individual window. Each window would cost at least £2,000 to replace.”

In spite of the aggravation and costs, he persevered and, in 2013, opened the restaurant, enabling him to generate an income while renovating the property to offer accommodation. “It had been a 26-room hotel but the rooms were really small, so we converted it and reopened it earlier this year with 10 contemporary bedrooms and a larger space for the restaurant,” he says.

Looking ahead

John, 27, has set up a limited company with his parents. "They also act as the painters and decorators" says John. Although he has no previous business experience, he has the benefit of an experienced father to confide in. Together they are starting to plan for the future. The Taynuilt now employs five people, with a further seven stepping in at the height of the season. John realises that auto-enrolment regulations require him to provide qualifying staff with a workplace pension scheme.

John has no pension himself and sees the building and the business as his security. But he is a long way from retirement. "I have one daughter and another one on the way in August," John says. "If it all goes well and unless someone makes me an offer I can't refuse, I'll be here forever. When the time comes, I would like to pass the business on to my children."

While John understands the need for clear business planning, his focus is on his talents in the kitchen and the reputation of the hotel. “We’ve won awards for food and accommodation, including two AA rosettes for the restaurant,” he says. "It’s been a challenge to get to this point but we’re determined to make a success of it. This is a beautiful part of the world and I’m very proud to be championing the local produce.”

Expert view

Richard Foreman, Chartered Financial Planner, NFU Mutual

John and his parents have overcome a number of challenges and made a significant investment to establish a successful business. The right financial planning can help them protect and build on this success.

John is the driving force behind the business, so it’s important that he protects both himself and the business should he be out of action through illness or injury. Putting in place income protection cover can provide a regular income to John, taking financial strain off the business if he needed to employ a manager in his absence.

John and his parents also need to think about what they would want to happen to the business and any loans made, in the event of the death of any of the shareholders. To ensure that the ownership of the business ends up in the right hands at the right time, it’s important that John and his parents have in place a shareholder agreement and up to date wills. Life insurance can be used to provide a lump sum to surviving shareholders to help them buy the deceased's interest in the business. With a young family to consider this will be a key part of John’s planning, to make sure they are protected.

John is aware of the requirement to enrol his employees and contribute into a pension for them, he can find out the date he needs to comply by visiting the Pensions Regulator website. A pension could provide John with a very tax-efficient way of taking money out of his business. It would also provide him with some diversification, meaning that his retirement income wouldn’t be solely dependent on the success of the business.

Pensions can also play an important part in succession planning. They can provide a source of income for the older generation, which may allow them to take less from the business. The younger generation may also be able to use their pension funds to buy commercial property / farm land from the older generation via a Self-invested Personal Pension (SIPP) as part of the family’s wider succession plan.

It’s never too early to think about succession planning. The earlier you start the more options you have available. It’s important to involve the whole family and take advice.

YOU NEED TO KNOW

  • The tax treatment of pensions depends on your individual circumstances and may change in the future. 
  • The value of pensions may fall and you may get back less than you invested.
  • Self-invested pensions require active management and investment expertise. Charges may be higher than for other types of pension plan.
  • Farmland and commercial property may be difficult to sell.

GET IN TOUCH

NFU Mutual Financial Advisers can help you and your family plan for the future. Speak to your local NFU Mutual Agent or phone 0800 056 0142 (select option 3) and we will put you in touch with your personal Financial Adviser.

Tips when buying a listed building

Listed building status creates a host of insurance considerations. We asked Guy Shaw, Client Director at loss-adjusters Cunningham Lindsay, for five tips

1. Be sure of exactly what grade the Listed status is, which buildings it relates to and if a specific feature is of particular importance. We have had experience of properties not being readily identifiable from the British Listed Buildings website after a postcode search, due to data errors. A wider search may be needed if you suspect the property is listed using the Historic England, CADW (Wales) or Historic Scotland websites.

2. Identify any parties who might need to be involved in signing off work to the property, for example Conservation Officers or Building Control. Try to ascertain whether there will be any conflict between their requirements and those of the Listed Building Officer.

3. Arrange for a pre-loss valuation of the property to ensure it is insured for the correct sum. Calculating rebuilding costs for listed properties can be complex and specialist knowledge is required.

4. Identify local contractors who are experienced and specialise in listed properties. There may well be some that have previously worked on the property and understand the issues and challenges.

5. Listed properties normally don’t have modern damp proofing, so it is vital to understand how the materials are designed to perform and what alterations have been made historically, which can cause future problems. For example, if sand cement renders and non-breathable paint are used in place of traditional materials.