mortgage lenders attitude to subsidence

propertyrental

Duplicate as no replies on property board:

Will banks lend against a property that's had subsidence. More specifically:

• The house is/was unaffected
• a conservatory was added, with inadequate foundations
• the conservatory came away from the house
• the insurers accepted a subsidence claim and paid for the fix
• the conservatory was demolished and replaced, with improved foundations and everything 'made good'
• a 'Certificate of Structural Adequacy' was issued

My questions then are
1) to what extent will this concern future mortgage lenders, and what impact will it have on saleability and value? and
2) what paperwork would be required, or would be of benefit, to satisfy a lender?

kingstreet

Lenders are usually reliant on surveyor's comments re property defects. A structural engineer's report may be requested.

Often a lender will rely on the purchaser's ability to insure the property on standard (CML) terms (ie excess of no more than £1,000 for subsidence, heave or landslip).

ACG

It might also be worth looking at buildings insurance. Will it be expensive? That can be an issue. 

In all honesty, this is one of those things I would probably try to check with a lender upfront. I doubt it will be a deal breaker, but it is not something that has hit my desk before so have never had to research it. 

dunstonh

Will banks lend against a property that's had subsidence.

Yes.   However, "had subsidence" isn't helpful.   A 17th Century property, for example, could have all types of movement and subsidence over the years and that would be expected.  In contrast, a new build with subsidence would be a different kettle of fish.

Each case would be looked at on its own merit.    Do not forget to factor in increased home insurance costs.  They can be significant on houses with relatively recent issues.   But again, it depends on what the issues were.

propertyrental

Thanks all.

One of the main comparison sites clearly had access to some shared insurance database. The question
"Has the property ever suffered subsidence" was pre-filled 'yes', and
" is there a certificate of structural adequacy" was prefilled 'yes'.

Number of insurers quoting was limited but the 3 cheapest were between £350 and £500 so acceptable. But subsidence excess was £2500.

kingstreet

It used to be CML Handbook 6.14.2 which dealt with the lender acceptable insurance terms where the £1,000 max excess was quoted. I don't know the UKFD handbook clause.

propertyrental

kingstreet said:

It used to be CML Handbook 6.14.2 which dealt with the lender acceptable insurance terms where the £1,000 max excess was quoted. I don't know the UKFD handbook clause.

After some searching I discovered the UKF handbook (no 'D'!) which says:

6.14 Insurance
6.14.1 You must make reasonable enquiries to satisfy yourself that buildings insurance has been arranged for the property from no later than completion.

You should remind the borrower that they:

• Must have buildings insurance in accordance with the requirements of the mortgage contract no later than completion, and
• Must maintain such buildings insurance throughout the mortgage term.

No mention of a maximum subsidence excess (though individual lenders may have this in Part 2). 

Incidentally surprised it says 'no later than completion' as most contracts now pass the risk to the buyer at Exchange.

kingstreet

I work in newbuild, so we all call it the UKFD form (UK Finance Disclosure of Incentives) that was previously known as the CML. Hence the superfluous 'd.' Fifth edition of standard conditions of sale confers risk on purchaser, hence the need for insurance cover from exchange rather than completion.

Yes. The max excess may not be in the general handbook terms but I've definitely seen it mentioned somewhere, but not recently. Anyone purchasing such a property will have to go by their particular lender's requirements.

ACG

propertyrental said:

Thanks all.

One of the main comparison sites clearly had access to some shared insurance database. The question
"Has the property ever suffered subsidence" was pre-filled 'yes', and
" is there a certificate of structural adequacy" was prefilled 'yes'.

Number of insurers quoting was limited but the 3 cheapest were between £350 and £500 so acceptable. But subsidence excess was £2500.

You might find you get better terms by going via a broker or calling up the insurers directly to discuss it given the circumstances. 

propertyrental

ACG said:

propertyrental said:

Thanks all.

One of the main comparison sites clearly had access to some shared insurance database. The question
"Has the property ever suffered subsidence" was pre-filled 'yes', and
" is there a certificate of structural adequacy" was prefilled 'yes'.

Number of insurers quoting was limited but the 3 cheapest were between £350 and £500 so acceptable. But subsidence excess was £2500.

You might find you get better terms by going via a broker or calling up the insurers directly to discuss it given the circumstances. 

Thanks, and yes. If I proceed to buy, I will do that and compare. Insurance wise, it was just to check I'd be able to insure, and at a reasonable price.

My concern is around a subsequent sale down the line. I'm a cash buyer so can do as I please, but when /if I (or my Executors) come to sell, will there be problems and how to mitigate them?

JMA74

Check Lloyds Bank insurance. Not through comparison sites but go direct.   Last I looked their question was around if the property has current subsidence issues.  If its been resolved you can answer No and you get a normal quote.   Most other insurers have a 10yr/25yr rule.   I have checked this with Lloyds directly and have a live chat print somewhere.  Be worth double checking again though

The policy wording is:

The home including any brick, stone or concrete outbuildings:

Does not currently have any damage which you know is caused by subsidence, or have been advised could be caused by subsidence

If subject to any previous subsidence damage, has had that damage fully rectified and is no longer required to be monitored.


As far as mortgages are concerned, it will come down to valuers comments.   My own property had previous subsidence but its 140 years old and i am in the fens so its kind of expected.  No issues at all.   On the other hand, when i worked in the estate agents as a broker I saw a property with certificate of structural adequacy drop about £100k in value compared to what comparable properties were selling for and they still couldnt get it shifted.  Many sales fell through.