Offer renegotiation after insurance claim revealed cracking

housejess

Good morning,

I am in the process of buying my first property, a 3-bed mid-terrace (mortgage offer approved, survey done, searches done). The survey came out fine, but after this was done, I noticed in the contract pack that the house had a recent insurance claim for front elevation cracking caused by a tree on the street. The tree was pruned (not removed), the cracking was monitored by the vendors' insurance for 12 months, and then repaired after no more movement was detected.

Since I didn't know this, I didn't take it into consideration when I made the offer for the property. The property (I am buying to live in) will be overall more expensive because: i) needs to be insured by a specialist insurer which is more expensive; ii) needs to have a specific action plan to keep the street tree (owned by the council) in check; and, iii) future buyers might be put off because of the previous history of cracking.

I can easily calculate the costs of points i) and ii) above, but I am finding it more difficult to come up with a number for iii).

Do people have any suggestions for how I can come up with that number or if I even should, given that the property has been fully repaired? (note that the survey did not reveal any sign of cracking or subsidence)

Thanks very much in advance.

TheJP

The only point i could see you getting a reduction is in any increase of insurance premium I don't see it being more than £1000. You cant ask for a reduction because you think you may not sell it in the future. If i was in the sellers shoes i would offer a nominal reduction as the insurance has rectified the problem. How much increase on premiums have you estimated?

tooldle

Surely the existing insurer continues to insure?

housejess

Thank you for the answers.

The existing insurer will continue to insure, but with an increase excess to £10k from £1k.

The increase on premiums with a comparable property without the cracking history (and the remedial work) is ~£250 p/a.

So overall, it would be a £2.5k over 10 years assuming no further events.

Is it worth it for me to ask for an indemnity insurance?

Thanks again.

TheJP

I don't think indemnity would be worth it as your insurance will cover everything. Indemnity covers you from a legal standing which I don't see anyone coming after you because of a crack repair.

I would ask the sellers nicely if they would contribute to the increase in premium but i doubt they will pay £2.5k as there is no guarantee you'll stay there that long.

tooldle

My first house was underpinned by the previous owners insurance. If i remember correctly we stayed with the original insurance for a few years making 5 years since the original claim, and then moved to another company to achieve a discount without issue. Why 10years? It seems a long time for such a minor matter.
There are a lot of reasons why a premium may increase, some of which are not within the control of the owner, as appears to be the case here. Having paid the excess on their own claim, the seller may not take kindly to a request to compensate you for anticipated insurance costs. 

housejess

Thank you for your replies. I take that I shouldn't worry too much about this then? It's the first property that I buy, and while I really like the house, I want to make sure that I am not missing any important aspect.

Regarding the cracking (the level of damage was moderate and classified as category 3 in accordance with BRE Digest 251, according to the CSA), does anyone have an estimate of how much that would impact the valuation of the house even when it has been repaired?

tooldle

Why would the value of the house be impacted by a repair? The problem is fixed. 
My underpinned house on resale smashed the ceiling price for the street. 
What has your surveyor said about this? From what you say above it seems a minor problem to me which importantly has been fixed. 
 I’m confused as to why you are suggesting the property needs a specific action plan to keep the street tree in check. The tree is owned by the council, so would this not be their responsibility? 

housejess

The surveyor is satisfied with the repair work, but he has been very clear that a report should be obtained from a tree specialist for advice to ensure that the same doesn't happen again in the future. The tree is indeed owned by the council, and I would also think that it should be their responsibility. But the reality is that the tree was responsible for the cracking, that the current owners' insurance had to fix this (not the council), and that I would be paying the much higher excess should this happen again if I go ahead buying the property. I guess this is why I am more concerned about it.

Regarding the (market) value, I would have assumed that since the house now has a history of subsidence (however minor this was), this is something that will come up in any subsequent sale and might affect how easily the house will sell, which might require a lower price point if the house compete in the same price bracket against houses without a subsidence history?

tooldle

Definitely investigate more on the status of the tree. If no TPO then a dialogue with the council should be possible. Be aware though if you are on clay, removal of the tree could cause the reverse problem i.e heave.
Is the cause tree roots impacting the property, or is it that the tree has dried the soil out (common in hot summers particularly on clay.)
Subsidence seems to strike fear into people when perhaps it shouldn't. You've not mentioned under-pining only repair of a crack. Many many areas of the UK have soils that make them prone to subsidence. Then, there  are the additional causes. In my case it was a culvert in the street collapsing that caused the issue. Once fixed and especially if underpinned the house could be argued to be more stable than any of its neighbours. 
This site maps subsidence hot spots across the UK UK Subsidence Map, Subsidence Hotspots | Geobear UK The webpage does help with putting concerns in context.

housejess

Thanks very much, tooldle. That was really useful.

I am not sure if there is a TPO for the tree. In principle I do not want to remove the tree. The cracking was due to clay shrinkage subsidence. This was caused by moisture extraction by roots from the nearby tree. I would just want to make sure that this doesn't happen again.

Thank you again.