Mortgage Declined Because Flat Has Commercial Storage Below

A mortgage declined because a flat has commercial storage below can come as a surprise, particularly when the flat itself is purely residential and appears suitable in every other way.

Mixed-use buildings are common in many areas, especially in town centres and redeveloped sites. However, some mortgage lenders apply restrictions based on what is located beneath or alongside a residential flat, even when that space is used only for storage.

This guide explains why flats with commercial storage below can trigger mortgage declines, how lenders assess this risk, and what it means for buyers.

What does “commercial storage below” mean?

Commercial storage below refers to non-residential space located directly beneath a flat.

This may include:

• Warehouse or stock storage units
• Retail back-of-house storage areas
• Distribution or logistics storage
• Business-owned storage facilities
• Shared commercial basements

Even when there is no public access or customer-facing activity, lenders still classify this as commercial use.

Why lenders assess property risk as well as borrower risk

Mortgage lenders assess two main elements: the borrower and the property.

Even if your income, deposit, and credit profile are strong, a property can still be declined if it falls outside a lender’s property criteria.

With mixed-use buildings, concerns usually relate to resale, long-term marketability, and future risk rather than the current use of the space.

Why commercial storage can be an issue for lenders

Commercial storage introduces factors that lenders cannot fully control.

From a lender’s perspective, risks may include:

• Change of use in the future
• Increased fire risk or insurance complexity
• Heavy goods movement or loading activity
• Structural impact from commercial operations
• Reduced buyer demand on resale

Even if none of these issues exist today, lenders assess potential risk over the full mortgage term.

Why “storage only” does not always reassure lenders

Buyers often assume that storage-only use should not be a problem.

However, lenders consider what the space could become, not just what it is currently used for.

A storage unit could later be repurposed for:

• Retail use
• Light industrial activity
• Distribution hubs
• Commercial workshops

This uncertainty makes some lenders cautious.

How mixed-use properties are treated by lenders

Mixed-use properties combine residential and commercial elements within the same building.

Many lenders restrict lending where:

• Commercial space exceeds a certain percentage of the building
• Residential units are directly above commercial areas
• The commercial use is considered higher risk

Commercial storage is often classed as higher risk than offices or professional services.

Why flats are more affected than houses

Flats are generally more affected by commercial use below than houses.

This is because:

• The structure is shared
• Leasehold arrangements add complexity
• Responsibility for maintenance and insurance is shared
• One unit’s use can affect the entire building

Lenders assess the building as a whole, not just the individual flat.

How valuations influence these decisions

Many declines related to commercial storage occur at valuation stage.

The valuer assesses:

• Market demand for similar flats
• Ease of resale
• Impact of commercial use on value
• Suitability for mainstream lending

If the valuer reports restricted marketability, the lender may decline automatically.

Is this related to affordability or credit?

No. A mortgage decline due to commercial storage below is unrelated to personal finances.

You may have:

• Strong income
• A large deposit
• Excellent credit history

The decision is based entirely on property criteria.

Why some lenders decline and others do not

Lender policies vary significantly.

Some lenders will consider flats above low-risk commercial use with additional conditions. Others apply blanket exclusions to avoid complexity.

This explains why one lender may decline while another is prepared to consider the same property.

How this affects first-time buyers

First-time buyers are often drawn to flats in mixed-use developments due to affordability.

However, smaller deposits and limited lender choice can make property-related restrictions more impactful.

We cover similar issues in our wider first-time buyer mortgage guides.

What lenders usually want to see

Where lenders do consider flats above commercial storage, they often look for:

• Low-risk, non-industrial storage use
• No public access below the flat
• Limited proportion of commercial space
• Strong resale demand locally
• Clear management and insurance arrangements

Meeting these criteria improves lender confidence but does not guarantee approval.

Should you reapply to the same lender?

If the decline is due to property type, reapplying to the same lender is unlikely to succeed.

Property policies tend to be fixed, and the same decision is often repeated.

Key points to understand

• Commercial storage below a flat can trigger lender restrictions
• The concern is future risk and resale, not current use
• Valuation reports often drive these decisions
• This is unrelated to credit or affordability
• Different lenders take different views on mixed-use properties

This guide provides general information only. Personalised mortgage advice should always come from a regulated mortgage adviser.