Survey has found evidence of subsidence - advice appreciated!

graham_and_tiana

Hi there,

We've read back through some incredibly helpful previous posts, and are hoping that some of you clever, experienced property folk can help us with our current house dilemma.

We have had an offer accepted on a 2-bed Victorian house in NE London. Property was suffering quite serious damp problems so we had a full structural survey, which found evidence of subsidence. Caused, he is pretty sure, by a local authority tree on the street. He says it's very mild and has almost certainly only started this summer, with the roots needing to search further for water during the heatwave.

We are really torn about what to do. On one hand we really want the house. We have made the classic mistake of mentally moving in and we do think it's a brilliant house compared to others in the area we've looked at (when weighing up size, condition, feel, location etc). On the other hand, we are concerned it will be a nightmare to insure and to get a mortgage on - our broker thinks the current mortgage offer will be invalid once the bank hears about the survey. And then obviously long-term we are concerned about having a seriously compromised asset, that will be incredibly difficult to sell in the future (although we are hoping this will be our home for at least 10-years).

We are also trying to think how we can use this situation to our advantage. One scenario is that we ask the vendors to deduct the cost of underpinning from the price. The surveyor has stated that once underpinned the house will be entirely structurally secure - more so than it was before. If this process was comprehensive and supervised by a structural engineer, would it make getting insurance easier? Then to reflect the fact it's going likely be much harder to sell in the future, we would ask for an additional discount. The house is in need of lots of modernisation - something we were imagining would take us a long, long time to be able to afford. If we had enough cash left to upgrade it all straight away, essentially moving into our 'dream home', we feel that might make up for the fact we would likely get below market rate when selling in the future.

This is turning into a bit of a rambling post, but I am wondering if anyone has any advice, including on whether the above scenario sounds realistic. The house was apparently left in someone's will to two people who couldn't decide what to do with it - it's been empty for 3 years and now it's being sold by a private company. Our instinct is that they probably want to get it off their books, but we really don't know (also because of this set-up we don't know if they have Buildings Insurance, because one of the things our broker has mentioned is that if they do and we can transfer it over and make a claim that would be another less dramatic solution?)

Lastly, does anyone think it's possible that in 10-15 years subsidence will be less of a problem for lenders and insurers because more and more properties will suffer from it? This house is on a fairly standard London street with trees on the pavement and wasn't affected until this summer. Surely this must be happening across the UK, and will only get worse? Will a bigger market emerge for insuring/lending on these types of buildings and make them easier to work with? All speculation I know!

Thanks in advance for any help you can offer.

Graham & Tiana

Margot123

"He says it's very mild and has almost certainly only started this summer, with the roots needing to search further for water during the heatwave".

Then it doesn't seem to be much of a problem.

Can you not investigate the costs of having the roots cut back and an underground barrier of concrete (or similar) put in? Not sure of the terminology, sorry.

tlc678910

I wouldn't think that you could buy a house knowing full well it had subsidence and then get an insurance company to pay for you to fix it so check that out very carefully if it is a route you are considering - if the insurers say they will get it in writing.

The house will be worth less than the same house without subsidence so make sure you pay less than the same house would be without subsidence. In turn when you come to sell you should expect to achieve less than the same house without subsidence. The reduction would need to make the underpinning worthwhile versus just buying another house.

The owner/company is unlikely to want to get into underpinning work so if purchasers are struggling to get a mortgage on the property it is likely that they will sell it as "cash buyers only" or put it into auction.

graham_and_tiana

Thanks both.

@Margot - the confusing thing is you are right - it's not actually a huge deal. It doesn't sound like the house is in a remotely dangerous condition. And it's curable by taking care of the tree and definitely if we choose to underpin. The problem seems to be that insurance companies and banks are spooked by the words subsidence and underpinning.

@tlc - we've asked our solicitors to find out about current buildings insurance. Not sure what the situation is yet but you could well be right. I think you're right about the level of price reduction - it needs to reflect that the property is probably 20% less desirable (or there abouts) compared to if it doesn't have these issues.

Tom99

[FONT=Verdana, sans-serif]For subsidence which is very mild, only just started and probably due to a LA tree, I am surprised your surveyor had jumped to the conclusion that underpinning will be required since that is probably unlikely.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]If the problem is reported to the current insurer they will probably set some investigation in motion, maybe an arboricultural report which will test which type of tree root is near the property, monitor the property for further movement over several months or years and maybe pester the LA to remove of trim the tree.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT]U[FONT=Verdana, sans-serif]ltimately all that may be required is to fill in the existing cracks.[/FONT]

[FONT=Verdana, sans-serif]All this will take time, likely years. Future insurance premiums will likely be much high than normal and the subsidence excess a lot higher than the usual £1,000 but once resolved it should not have too much effect on price and difficulty in selling.[/FONT]
[FONT=Verdana, sans-serif]
[/FONT][FONT=Verdana, sans-serif]Normally when an insurance claim for subsidence has been made the current insurer will also agree to insure the purchaser so maybe the way forward is for you to take over a claim on the current insurance policy.[/FONT]

[FONT=Verdana, sans-serif]You might just frighten the seller into chopping 20% off but I doubt it.[/FONT]

Arklight

Serious damp problem and subsidence? Doesn’t sound ideal.

Subsidence isn’t uncommon in some parts of London (due to clay soil and shallow foundations) and buyers have lately ignored it because it’s London and no price is too high, no sacrifice too great, and no property too miserable to not be worth having a London post code.

In fact, in the time it took you to write subsidence in an email to the estate agent, the house already had 3 open days, 32 offers, and went sold unseen to a buyer from the Middle Easy for £250k over the asking price.

If that’s the case for you then go ahead. If not, think very carefully. Subsidence isn't as “bad” as people think in that unless it’s over a mine it isn't going to fall down. It is however a royal pain in the neck.

Taking on a house that has had subsidence that has been resolved is one thing, taking on one that’s still moving is quite another.

Contrary to the popular old wives tale on here, insurance companies aren’t legally (or in any other way) obliged to cheerfully transfer the £112 a year policy to the new owners that the old owner had, while they pay through the nose for years for monitoring and underpinning.

They may cover you if you meet their underwriting requirements. They will likely escalate the premium through the roof. They may just refuse to talk to you at all (and this is much more likely based on my experience) and leave you at the mercy of whatever your seller feels like telling you about his dealings with them, and what their intentions may be toward a new owner.

They ARE obliged to cover subsidence that occurred while they were covering the property, so the seller's insurers are on the hook for this, at least. Although that won’t help you getting insurance moving forward on a building that’s still shifting.

You should try Adrian Flux for specialist insurance. They won’t mince their words.

graham_and_tiana

@Tom - thanks for that. So a lot depends on what the current situation is with the insurance. We're still waiting to find that out from the solicitors. As I say, it's a strange situation, the vendors, who we believe inherited the property, are being represented by a company and the place has been vacant for around 3 years.

@Ark - we're defo not Middle Eastern investors, no once again it sounds like it's really tough to know how to proceed until we know what the deal is with the sellers insurance.

Either way, do you have an opinion on how likely it would be for us to get a brand new policy if we paid for underpinning (after a reduction in price) that was overseen and documented by a structural engineer? To me this seems like the the most logical way to do it, but I am essentially totally naive re the way the insurance industry works.

I will try and have a chat with Adrian Flux tomorrow, they seem to be quite well regarded.

Cakeguts

I hope you haven't made the classic mistake of offering on this house because it appeared cheap for the size and location it is in? If this is the case then the reason why it hasn't already been sold and has been vacant is because the owners were already aware of the subsidence and were selling it cheap because it has a problem.

graham_and_tiana

@Cakeguts - I did wonder that. House went up in March for 575k, reduced to 500k by the time we viewed it in August and after some haggling we had an offer accepted for 492.500. I would be sure they did know, were it not for the fact the surveyor is pretty sure the problem only started this summer, because of the heatwave. It's very difficult to get any info on the property because it's being sold my quite an unconventional vendor, and has been vacant for so long - but our solicitor is trying to find out what she can.

Arklight

graham_and_tiana wrote: »

@Tom - thanks for that. So a lot depends on what the current situation is with the insurance. We're still waiting to find that out from the solicitors. As I say, it's a strange situation, the vendors, who we believe inherited the property, are being represented by a company and the place has been vacant for around 3 years.

@Ark - we're defo not Middle Eastern investors, no once again it sounds like it's really tough to know how to proceed until we know what the deal is with the sellers insurance.

Either way, do you have an opinion on how likely it would be for us to get a brand new policy if we paid for underpinning (after a reduction in price) that was overseen and documented by a structural engineer? To me this seems like the the most logical way to do it, but I am essentially totally naive re the way the insurance industry works.

I will try and have a chat with Adrian Flux tomorrow, they seem to be quite well regarded.

If you’re trying to insure the property while it’s still moving you’re in the realms of specialist underwriting, along with the people with criminal records and prior cancelled policies due to fraud. Some of them may be trying to buy a subsiding house as well, so technically be worse off than you.

This is why a house with subsidence is such a blight to sell on, and a pain to buy. Something that used to take 5 minutes on confused.com suddenly becomes a major undertaking.

If you can get your vendor to get his insurance to accept liability for the subsidence and pass the policy on to you at exchange, or cover both of you at any once until you complete, then that should do it for the short term.

His insurance will refuse to deal with you at all at the outset so you’ll need to trust him to actually arrange all this and be honest in telling you what they say.

Cakeguts

How does £500k compare to the prices of other houses in the area? If it is cheap then the vendors will have known that there was a problem.