Mansion house chance

An unexpected result of recent leasehold reforms has been to focus the attention of investors on mansion flats, the huge and sometimes rather intimidating blocks built to house the upper classes when they abandoned their town houses in the first half of the 20th century.

An unexpected result of recent leasehold reforms has been to focus the attention of investors on mansion flats, the huge and sometimes rather intimidating blocks built to house the upper classes when they abandoned their town houses in the first half of the 20th century.

Mansion flats are usually in prime locations (the very first in London were Albert Hall Mansions built in 1879, overlooking Hyde Park) and have floor areas developers would describe as mega-penthouses today. Many are well designed by top-name architects (Albert Hall Mansions was by Norman Shaw) and extremely well built.

Unfortunately, some have fallen on hard times, having been occupied for decades by elderly leaseholders whose sole aim has been to cut service charges to the bone. As a result, they tend to look dark, shabby and forbidding. And underpriced.

Developers tended to shy away from mansion flats because however much you spent on refurbishing and updating the inside, buyers would never look beyond the flaking paint on the windows, the potholes in the car park and the threadbare carpets in the gloomy corridors. Getting the place done up usually faced the obstacle of a freeholder who had lost the war with the tenants and was seeking to minimise costs while perhaps making a bob or two by putting mobile phone masts on the roof and flogging off car parking spaces to local businessmen. But leasehold reform has brought with it the opportunity for the leaseholders to gang together and sack the management company, either to replace it with one of their own choosing or to run the block collectively. Investors sense an opportunity to make some money by buying a flat and campaigning for the place to be refurbished.

"Mansion flats can be a good investment if you buy one that is really run down and you can bring it up to standard," says Justin Sumner of Savills. "Unfortunately finding one is getting quite difficult because so many have been refurbished recently."

Although most mansion flats are very large, often as large as an average house, their internal layout can pose problems in adapting the flat to modern lifestyles. "They were built before ensuite bathrooms were thought of," says Sumner, "Some rooms look into internal light wells which is not favoured today."

The kitchen is often located in a jumble of small rooms at the back where the servants used to live and work.

"With modern building techniques you can put in new openings in the walls, and rearrange the floor plan so that the main rooms look outside and rooms such as bathrooms look on to the light well," Sumner says.

The rearrangement has to be done according to building regulations and with consideration for the neighbours, Sumner points out: "You can't put the loo directly over a bedroom," he says. "Generally, the building's surveyor will have a plan so that kitchens are above kitchens, bathrooms above bathrooms and so on."

Residents like mansion flats because of one feature that separates them from ordinary flats - the porter. He is usually a tower of strength when it comes to bringing shopping in from the taxi, and a mine of information about local facilities. "Tenants like mansion flats because they are period buildings and because of the porter," says Liz McCullum of Allsops in Knightsbridge. "Unfortunately, this means service charges are high which puts off highly geared investors."

The other deterrent is old-fashioned central boiler systems supplying all hot water and heating, which adds yet more to the service charge.

At present, the best prospects for mansion flat investment is probably in Bloomsbury, just south of Kings Cross. This area was developed by the Victorians for the middle and working classes, so there is no porter, the flats are smaller and many feature outside walkways. However, a two-bedroom mansion flat in Judd Street, for example, will still be considerably larger than a two-bedroom flat in a modern development, according to Andrew Sorene of Frank Harris & Co. Sorene is selling a flat there at £310,000, which will probably attract a rent of about £325 a week, a yield of 5.25 per cent. Unfortunately, prices in the area have already risen to the point that complete professional refurbishment will probably not pay its way in capital appreciation, Sorene says. "A buyer would have to cut costs by DIY," he says.

"My view of mansion flats is that on the whole they are best for families rather than investment," says Barbara Mansour of Cluttons in St John's Wood. "The size is not conducive to many lets and the service charges are high."

Investors forget that taking over the management company to implement a refurbishment programme will increase service charges, Mansour points out. "You can pay upwards of £20,000 contribution to set a block in order, so it takes a lot of nerve to do it," she says.