Shared water on rural property causes lender palpitations

peter_964rs

The palpitations are mine because I'm desperate to exchange on a rural property we're buying and keep getting last minute hitches.

I would appreciate any advice or guidance!

Today's last minute hitch is:

1. A previous owner built a bungalow in the back garden of our rural property and fenced it off, moved into it and sold our house to the current owners in 2004 (it still has lots of garden space).
2. The mains water supply and stopcock are by the lane leading to these properties about 1km away.
3. Rather than lay a new pipe (required digging up fields not owned by him) he used the existing mains water pipe into our purchase and teed off it, installing sub water meters which are apparently actual Southern Water meters sourced from 'somewhere'.
4. These are not recognised by Southern Water
5. Therefore, my house pays the bill for water consumed by both properties and the sub water meters are then read to determine a split in costs. This is an informal arrangement that has stood since 2004.
6. Along we come trying to buy the property and our mortgage lender has decided this may not be acceptable to them, and they require a separate supply to be provided to next door by completion (due mid Feb is we exchange today or tomorrow).
7. This would mean next door disconnecting from our pipes and spending a few £k to have a new pipe laid. Unlikely!

Any ideas?

silvercar

Seller needs to sort out as this will occur whoever buys.

Two options:

Persuading water company to recognise the 2 meters.

Getting a formal agreement written into the deeds that the bungalow is responsible for their share of the water bill.

Mallotum_X

If the neighbours refuse to pay, then you end up with the bill, thats the worry for the mortgage co as they will think the property could be devalued as a result.

Can the arrangement not be formalised?

Have you spoken to Southern Water about this?

What costs would be incurred to change, can the supply not be branched before your meter and then each property has a separate bill?

bryanb

But the property you are buying has a legal supply. Surely the problem belongs to the bungalow?

How did the lender find out?

DaftyDuck

If the second property ever refused to pay their share of the bill, you would be able (unlike a water company) to simply disconnect their supply. Unless there is some legal documentation otherwise (and you say it's an informal agreement), you are on strong ground.

Now, if you were buying the second property, I'd agree. No legal water supply, and I'd run a mile.

I have coped with a single cold tap fed by a spring on a hill half a mile away... but I wouldn't want that again!

peter_964rs

Hi - I think our solicitor was obligated to make our lender aware. I understand arrangements like this may be common in the countryside, but it is a surprise to me.

One option may be to formalise the arrangement, agreed.

Southern Water were approached some time ago and did not agree to the sub water meters.

The problem is the mains water supply terminates at the bottom of the hill and doesn't run up the lane to the houses. We own the pipework that runs from the water meter and stopcock about 1km away. So to formalise a separate supply would involve installing more pipework, and from Southern Water's perspective, digging up the road - they clearly won't do this.

Yes, we have a legal supply of water and its the bungalow that has an illegal supply. I guess the lender's perspective is their risk of the property's value beging not as stated by the valuer because of this issue.

Is there any smart argument I could use to persuade my lender there is no impact to the property's value?

G_M

peter_964rs wrote: »

Hi - I think our solicitor was obligated to make our lender aware.
Of course. As well as acting for you, he is acting for the mortgage lender
I understand arrangements like this may be common in the countryside, but it is a surprise to me.
possibly quite common - but increasingly these days lenders insist on proper legal arrangements an query the old informal lagreements

One option may be to formalise the arrangement, agreed.
This could be done by a Executing a simple Deed of Easement which specifies the rights and responsibilities of each party (one to supply the other to pay, + ho) binding current and uture owners, and registering said dead with the Land tegistry.

But will have to be done by seller (and agreed by other home-owner!) before the sale can proceed - so expect a delay.

The lender is likely insist on a solution before lending.

I had a similar issue with both water and drainage between self and neighbour. Although neither of us is selling, and the informal arrangement works well, we put a Deed in place to formalise things so as to avoid precisely your siuation in the future - see thread here.

edit: re-reading my old thread, I realise another option (quicker) might be to buy indemnity insurance which would cover you/the lender in the event of a dispute or claim over the water supply.

Prothet_of_Doom

Back out of sale. Or negotiate a price reduction based on the quote from the supplier.

Note that in a previous house, I owned a 1/16th share in a water company set up to own and run and service 2 bore hole pumps, and being a townie, hated the whole thing.

peter_964rs

Thanks for the replies. I'm curious to know if this is genuinely common practice in rural areas, though?

Also - some feedback from our seller (with whom we are in contact and reasonably good relations given the circumstances) that his solicitors have stated they would never have flagged this to the lender as a risk. Is that right?

G_M

Solicitors are instructed by mortgage lenders to act on their behalf. The lenders have guides which their solicitors have to follow which tell them, amongst other things, what issues the lenders expect to be informed of. Different lenders have different guides, and different soliciors will interpret the guides, and their duties to the lenders, in different ways.

So it does not surprise me that a solicitor has flagged this up. The lender can then tell their solicitor either

*to ignore it and go ahead
* that the mortgage offer is withdrawn
* that the mortgage can go ahead provided a particular course of action is followed (ie an indemnity insurance, or Deed etc as described above

Often the lender will take advice/suggestions form the solicitor on the legal options before deciding.

peter_964rs

So, just an update: we had it officially confirmed that the lender won't lend whilst we have a shared water supply. This is causing us some significant issues as we need to exchange and complete soon! They insist on the neighbour having his own metered water supply; but the ballpark estimate for doing this by digging up surrounding fields, etc, is £12-£15k based on the cost of doing this back in 2002. Not popular!

Apart from our solicitor and valuer pleading with the lender to change their minds, I wondered if a solution might be to sink a borehole? We could sink one quickly and get South West water to reallocate the meter from our house to the bungalow so they then have their own supply. We think the cost of this could be in the region of £3500-£5000 - we know water is close to the surface because there is a well in the cellar of the house - but had some concerns:

1. does anyone know if lenders accept a private water supply?
2. do they have stipulations about the supply (e.g. must have been tested; must be registered with the environment agency; etc)?
3. anything else?

We think we might be able to get a borehole sunk in a week, getting us back on target for completion (more or less), plus there are grounds for sharing costs between houses on the grounds that the neighbour is unlikely to be able to sell his house in future, except to a cash buyer that isn't picky, if lender's criteria have changed in general.