Buying leasehold property with indemnity policy

Ashwini

Hello all,

I am very new to this site but have seen lot of forums post quite useful so thought of getting few of my questions answered.

We are in a process of buying a leasehold flat where the vendor has made changes (moving a wall) for which she had not taken permission and hence we are left with option of getting an indemnity policy in order to complete the contract exchange. However, our solicitor has mentioned that their company wont recommend this option and that to get it legalised.

My questions are:
1) Will buying a flat with indemnity policy make a difference to reselling it later after few years?
2) If we choose to get the council permission will it affect the process of buying?


Please give me some expert opinion so that we can take decision peacefully.

Thanks

Regards,
Ash

HouseBuyer77

It isn't the council's permission you require it's the freeholder's.

The indemnity policy will cover you for any potential loss of value should the freeholder force you to change the flat back to what it should be (it may also cover the costs incurred in doing this, not sure, may vary from policy to policy). It may also cover you for any costs of action taken against you by the council should it violate building regulations.

What it doesn't do is ensure the modification is structurally sound, nor will it pay costs should it need modifications to make it structurally sound and this is really the key point.

When was the wall moved? The longer ago the better. The council can only take legal action against you for building regulation violations for a certain period after the modification, and I think if the freeholder forces you to change it back you've got a stronger case that it should be left as is if it happened many years ago. Furthermore if it's not structurally sound obvious signs that this is so will have appeared (cracks in the walls).

You need to determine when it was moved, who moved it, whether or not the wall was structural and if so did they get a structural engineer in. Get actual paperwork from them not just a spoken statement ("oh, dave the builder said it'd be fine, no structural worries...."). Are you getting a survey? You could ask the surveyor to specifically comment on whether or not the wall is structural without getting a full structural survey.

If structurally sound, and it was done a while ago I'd probably be happy with the indemnity, though if you have a particularly proactive freeholder incurring charges to authorize the modification could be a worry.

HouseBuyer77

Oh and indemnity won't cover you if damage occur because it's not strucurally sound and indeed your building insurance might not either!

princeofpounds

1) Yes - you will need to provide an indemnity to onwards purchasers presumably, and some people might be put off.


2) Do not speak to the council about it for now. You (or your vendors) will then be unable to purchase a valid indemnity policy.


Either you accept the indemnity and move ahead, or you encourage the seller to regularise the situation before agreeing to purchase, or you move ahead and attempt to regularise it yourself.


The main thing to remember is that whilst a decent indemnity policy should protect you from the costs and loss of value in restoring the 'correct' situation, it won't stop you from having to move the wall back if required to do so.

marksoton

See that bargepole over there....

I wouldn't touch this property with it....

mrsg88

I just had a property purchase fall through on completion (yes completion) because of something similar to this and my advice to buyers going forward is if the seller isn't willing to rectify it before exchange, then walk away.

Our situation, which was missed by various parties during the conveyancing etc, was that our sellers had changed the flat's layout and removed a structural wall without adding in any additional support without building reg approval, co-freeholder approval or party wall notices. They wanted us to go ahead and complete, holding back some funds to complete the remedial works but it came to a point where we weren't willing to take on all the legal matters, let alone living on a building site for who knows long!

Our builder advised us that once you start fixing something, especially structurally, no doubt something else will crop up. I don't mean be a debbie downer, but I would walk away and save yourself the hassle!

eddddy

Ashwini wrote: »

We are in a process of buying a leasehold flat where the vendor has made changes (moving a wall)...

You need to be a little clearer - people are jumping to conclusions which may be incorrect.

The wall that was moved - was it load bearing, or just a partition wall?


If it was load bearing wall...
... you need freeholder's permission, building regs approval, perhaps you need a leaseplan variation - and if it was a very badly botched job, part of the building could fall down.


If it was a partition wall...
... you may need the freeholder's permission and perhaps a leaseplan variation. (No building regs and no risk of the building falling down.)


So is your solicitor talking about an indemnity policy for no freeholder consent or for no building regs - or do you need both policies?