Advice on buying with underpinning

whatuk65

Hi, we would really appriciate some advice,

We have put an offer on a 1960's ground floor masonette, that had to have underpinning 3 years ago due to a tree damaging the concrete floor and partition wall in one of the bedrooms. The tree has now been removed, and the hole filled in and a shed put in it's place.
We've checked the insurance, and understand that it's much higher than it would normally be, but the price is 50k cheaper on a property that would usually be worth around £375k. It also has a very large garden so the property could grow with us (hopefully in the right way), if we needed more room with an extension.

What are people's thoughts on this?
The property is a leasehold, but the garden is totally ours, so do people see any problems with extending into it? Is that kinda thing just a case of getting the freeholders and councils permission. I have no experience of this.
Also, is the underpinning just a total no. I know it'll be harder to sell, and the insurance will be higher, but that's why we'd get a £375k property to £325k. And if we plan to stay in it for a while we would be getting a lot for our money.

Thanks for any help,

M

Tom99

[FONT=Verdana, sans-serif]It should not be a problem providing you do all the necessary investigation.[/FONT]

• [FONT=Verdana, sans-serif]Who insures the building, you or the freeholder?[/FONT]
• [FONT=Verdana, sans-serif]What is the current premium and what is the subsidence excess, it may well be a lot more than the usual £1,000?[/FONT]
• [FONT=Verdana, sans-serif]Is a specification of the work undertaken available?[/FONT]
• [FONT=Verdana, sans-serif]Also a completion of repairs certificate and maybe a defects insurance guarantee?[/FONT]

whatuk65

Thanks,

We insure the property. They are currently paying £66 a month. Not sure what the excess is, but I shall ask.

I have a certificate of structural Adequacy, do i need more than that?

The company who did the underpinning say they guarenttee any work for 15 years.

Tom99

[FONT=Verdana, sans-serif]Check if the guarantee is an insurance backed one or only from the contractor, is it assignable to you?[/FONT]
[FONT=Verdana, sans-serif]Is the current insurer the one who paid the claim?[/FONT]
[FONT=Verdana, sans-serif]Check with the current insurer that they will allow you to insure with them.[/FONT]
[FONT=Verdana, sans-serif]If the current vendors are the ones who made the claim they may well have copies of all the reports that may well have been done e.g. soil, arboricultural, drainage, structural reports etc, as well as a specification of the repair work.[/FONT]
[FONT=Verdana, sans-serif]You may not need it all, but now is the time to ask if these documents are available as they may well be useful to you in the future if you seek insurance elsewhere say or even when you come to sell the property.[/FONT]

whatuk65

It says it's issued by Cunningham Lidsey who are the loss adjustors for Zurich insurance.
I'm assuming it'll be transferred to us if we buy the property.
Zurich Insurance as still the insurers, yes.
Yes, the current owners say they have all certificates and reports. They seem pretty on it regarding this.
In terms of discounts on the price, looking at other properties that have sold, I now think it's probably worth £340-£350. What sort of discount do you think we should be looking for. I mean if we stay there for 10 years, that's almost 10k in insurance alone.
Plus, how hard is it to sell a property that's had these issues?
And also, am I right in thinking that now the work has been done and everything's been ok for 3 years, there shouldn't be any more issues.

Thanks for any help, it's really appreciated. This isn't a simple purchase!

Tom99

[FONT=Verdana, sans-serif]I dealt with the sale of a house recently with a subsidence claim and whilst it did not put buyers off viewing there was only one serious offer, so yes it will put some people off but the discount was not that substantial. The longer ago the claim the less off putting it will be.[/FONT]
[FONT=Verdana, sans-serif]If you pay say £750pa extra insurance and were to value that at say 5% then that extra liability would be worth £15,000, then add on the discount for the 'off putting' factor of a claim having been made.[/FONT]
[FONT=Verdana, sans-serif]If the damage was caused by the tree which was removed 3 years ago and repair carried out 3 years ago as well and if no further movement has occurred since, then you should be able to reasonably assume the problem has been fixed.[/FONT]

whatuk65

Thanks Tom,

Sorry, can you explain the working out of the £15k a little more, I'm not sure I understand.

Yeah, that's what I thought, just wanted to check I wasn't being naive.

Tom99

whatuk65 wrote: »

Thanks Tom,

Sorry, can you explain the working out of the £15k a little more, I'm not sure I understand.

Yeah, that's what I thought, just wanted to check I wasn't being naive.

[FONT=Verdana, sans-serif]You can look at it in the same way you might value say a ground rent that you were buying out if you extended a lease.[/FONT]
[FONT=Verdana, sans-serif]So if you have to pay out an extra £750pa how much capital would you have to set aside to pay that amount in perpetuity? If you set aside £15,000 and got 5% interest each year that equates to £750pa[/FONT]
[FONT=Verdana, sans-serif]
[/FONT]
[FONT=Verdana, sans-serif]Hence £750 / .05 = £15,000.[/FONT]

whatuk65

Ah i see, and that's the norm for working out this kinda thing. So if it's worth 340, we should try to get it for 325?
Also, I know you can't say for sure, but there's no reason that because it's been underpinned, that we couldn't build an extension, if the freehold and council agree of coarse.

Tom99

[FONT=Verdana, sans-serif]No I don't think it is normal to capitalise an extra insurance premium in that way. That is just my way of looking at it but it seems a fair way to do it.[/FONT]
[FONT=Verdana, sans-serif]Re the extension, what exactly does the lease permit? Also is the land you want to build on within the demised area of the lease.[/FONT]
[FONT=Verdana, sans-serif]If its a recent build, check the planning consent conditions.[/FONT]
[FONT=Verdana, sans-serif]I think planning is more difficult with a maisonette there are no permitted development rights for example, but the underpinning will not make it any more difficult.[/FONT]

whatuk65

Ah ok.
Yeah, so just so I'm understanding correctly, the 15k reduction would be like putting that 15k in a bank account (i know you couldn't get 5% anywhere, but hey) and then using the interest to pay for the insurance?
And does another 5k discount for the difficulty we'd have in selling it sound fair? It's been on the market for 7 months already.
Also, I've read that if it has insurance then it shouldn't be a problem to get a mortgage on it. Do you think this sounds right?
The current owner has built a large shed where the tree was removed, and I asked him if he had permission from the freeholder. He said he didn't need it. The lease is over 900 years, the ground rent it £6, and the freeholder is only contactable by post, so I'm assuming the freeholder isn't really interested in the property, or uncontactable. I know we'd still need permission.
The garden which we would extend into is only attached to the ground floor maisonette, and the estate agent and vendor say we can do what we want to it (but obviously they would, they're trying to sell it).

Thanks so much for your help Tom.