There are a couple of obvious problems with cellar conversions - lack of light and head height.
These can be improved, but most cellars will never be the lightest, tallest spaces. Few cellars have enough head height as they are, as the ceiling should be at least 2.4m (8ft) from the floor. This usually means digging down below the existing floor level and removing lots of earth, an expensive and laborious task that can reveal hidden problems - you can never be sure what you’ll be dealing with with a cellar. If the rooms directly above the cellar have high ceilings, raising the floor in these rooms to create more head height in the cellar below may be an easier option than digging down.
Converting a cellar is more difficult if the house’s foundations prove to be shallow, which is often the case. The house will typically have to be underpinned, which isn’t cheap, although some cellar-conversion companies do this as a matter of course. As well as converting the existing cellar, they may be keen to dig out under the house where there isn’t a cellar, creating a much bigger space.
Another problem with cellar conversions is making them watertight - it’s really important to get a reputable company or companies to do the work. You can either employ an architect to draw up plans for the conversion (in consultation with a structural engineer) and a builder to do the work, or get a cellar-conversion company to do everything. If you use a builder, it’s a good idea to use a specialist damp-proofing/tanking company as well, because you don’t want to risk the conversion not being watertight.
Planning permission is usually required for cellar conversions, not least because most involve a light well being dug in the front garden. Your architect or cellar-conversion company should help with the planning process. In most cases, you’ll also have to have a party wall agreement with your immediate neighbours, for which you’ll need a good party wall surveyor. Unfortunately, you’ll also have to pay for your neighbours’ party wall surveyors.
If you own a leasehold flat that includes a cellar, converting it into habitable space can seem like a really good way to make your flat bigger and better. However, even if you own the cellar (rather than it being owned by the freeholder, as lofts often are), the earth underneath it may belong to the freeholder. If you need to dig down to create more head height, the freeholder or other freeholders (if you own a share of the freehold) may object to you increasing the size of your flat downwards and ask you to buy the extra space from them or, indeed, refuse to sell it to you, scuppering your plans for the cellar. The latter may seem unlikely, but it happened to me and I owned 50% of the freehold.