Non compliant septic tank indeminty for house buyer

greenwaving

Hi all... would value some conveyancing advice 

Purchasing a repossessed property. Full survey done and offer accepted. Purchase is dependent on a mortgage. Property is in Northern Ireland.

Sale is being held up by septic tank compliance. A consent to discharge has been applied for very recently (upon repossession) but we know it is highly likely that it will not be granted due to a nearby water course and probable drainage into a ditch. As purchasers we are content to proceed with the purchase with the understanding we will have to replace septic tank with a compliant water treatment plant. My concern is re issue around the mortgage and if anyone has experience with the purchase of a house with a non compliant tank using a mortgage? 

My thoughts are that we could either

A) proceed with sale as is (without consent to discharge in place but having been applied for) and purchase indemnity insurance to satisfy mortgage provider?

wait until consent to discharge is almost certainly rejected (this could take up to 4months) and then request the mortgage company allows sale to proceed with our assurances that the work will be carried out to make tank compliant asap?

Option A is preferable if feasible. Vendors (an investment bank who purchased the bad loan) will not expend any unnecessary time/money on this so will not be interested in making tank compliant themselves - they would likely just proceed to a cash only auction if a mortgage dependent purchase was unfeasible - so we need to have a solution.  Mortgage is with natwest. 

Our solicitors are on leave and I would welcome feedback before they return

Tldr... can you purchase a house using a mortgage which does not have a compliant septic tank if you hsve indemnity insurance/assure mortgage provider of your intention to resolve asap? Property in NI. Mortgage with Natwest. House repossessed so no option for vendor to do work.

user1977

Is suitable indemnity insurance available? It's not something I've encountered before, but I haven't had occasion to look.

I suppose the difficulty may be that indemnity insurance generally requires you don't rock the boat by highlighting the issue to the relevant authorities, which inevitably you'd have to do if you applied for consent for a new installation.

loubel

I'd  be surprised if you could get insurance. You'd be asking the insurance company to insure against refusal of consent.

It will be up to your lender whether they are prepared to lend on a non-compliant tank but they will likely down value the property if they are willing to proceed.

boots_babe

We bought our house 3 years ago, it had a non compliant septic tank. We replaced it with a small sewage treatment plant after we purchased. At no point was it even raised as a question by our mortgage provider. 

greenwaving

boots_babe said:

We bought our house 3 years ago, it had a non compliant septic tank. We replaced it with a small sewage treatment plant after we purchased. At no point was it even raised as a question by our mortgage provider. 

Did your solicitor raise it as an issue with you pre-purchase or where you "surprised" by it after purchase?

I am not sure what the legalities/ethics are if solicitor is aware of the issue in advance with regards to due dilengence to the mortgage provider. It may be that they are required to disclose what they have knowledge of that may have a material impact even if confirmation of compliance is not specifically requested by the provider? I know our solicitor has been checking on septic tank compliance from the outset once sale agreed and before mortgage approval so she will generally aware of the issue.

Our of curiosity who was your mortgage provider?

Eugh its very annoying as they house will be sold one way or another by the vendors as they are not in the business of holding onto repossessed properties and we are really keen to buy and not put off by the expense/hassle of installing a treatment plant (just added to the list of work that needs to be done) so it feels like a waste if we lose out on the house to a lower bidding cash buyer/auction over something as stupid as this which could be so easily solved

greenwaving

user1977 said:

Is suitable indemnity insurance available? It's not something I've encountered before, but I haven't had occasion to look.

I suppose the difficulty may be that indemnity insurance generally requires you don't rock the boat by highlighting the issue to the relevant authorities, which inevitably you'd have to do if you applied for consent for a new installation.

I don't know. I have seen one by Hayes Parsons which may provide cover but there may be specific requirements that exclude us and not sure if that would satisfy the mortgage company. Was hoping maybe someone had encountered a similar problem before 

greenwaving

loubel said:

I'd  be surprised if you could get insurance. You'd be asking the insurance company to insure against refusal of consent.

It will be up to your lender whether they are prepared to lend on a non-compliant tank but they will likely down value the property if they are willing to proceed.

If they were willing to proceed on that basis it would probably be fine. As I think there would be room to negotiate the cost with vendors for said reason. We are happy to cover cost of upgrading system ourselves but obviously need the property valuation to satisfy mortgage lenders so may need a price adjustment for this reason. I think it's the uncertainty of whether the mortgage provider would even proceed in the first place which I was hoping someone might have experience of...

I have zero experience of using indemnity insurance. It was just what I had hoped might be an option to satisfy the mortgage provider in the interim. But possibly it won't even be an option

user1977

greenwaving said:

boots_babe said:

We bought our house 3 years ago, it had a non compliant septic tank. We replaced it with a small sewage treatment plant after we purchased. At no point was it even raised as a question by our mortgage provider. 

I am not sure what the legalities/ethics are if solicitor is aware of the issue in advance with regards to due dilengence to the mortgage provider. It may be that they are required to disclose what they have knowledge of that may have a material impact even if confirmation of compliance is not specifically requested by the provider? I know our solicitor has been checking on septic tank compliance from the outset once sale agreed and before mortgage approval so she will generally aware of the issue.

If your solicitor is also acting for your lender then the lender is just as much a client as you are - so if something would be negligent not to investigate or highlight to you, the same goes for the lender.

Plus the lender will have specific instructions (they almost all use the UK Lenders Handbook as the basis for those) which are likely to require instructions to be sought anyway.

greenwaving

user1977 said:

greenwaving said:

boots_babe said:

We bought our house 3 years ago, it had a non compliant septic tank. We replaced it with a small sewage treatment plant after we purchased. At no point was it even raised as a question by our mortgage provider. 

I am not sure what the legalities/ethics are if solicitor is aware of the issue in advance with regards to due dilengence to the mortgage provider. It may be that they are required to disclose what they have knowledge of that may have a material impact even if confirmation of compliance is not specifically requested by the provider? I know our solicitor has been checking on septic tank compliance from the outset once sale agreed and before mortgage approval so she will generally aware of the issue.

If your solicitor is also acting for your lender then the lender is just as much a client as you are - so if something would be negligent not to investigate or highlight to you, the same goes for the lender.

Thank you. That is what I suspected. It makes sense to me re solicitors role/responsibility to mortgage company.

I think my main curiosity is if anyone had experience of a lender accepting a non-compliant tank with either a reduction in valuation of the property, amount held back from sale to remedy, indemnity insurance or the like? I have limited knowledge of conveyancing so it would be helpful to know if someone had similar experience and found a workable solution. Or maybe even had experience of an investment bank seller doing work to make house saleable? I think this last one is highly unlikely as their main aim is to get the property off their books ASAP without spending any money but maybe that is not always the case?

DayDreamerandGeneralWaster

I had this on a purchase last year that l pulled out of.

My solicitor was also acting for the lender and an indemnity would not cover it. The only option was to apply for an environmental permit or get it replaced. It was shared between 3 cottages and there was no formal agreement in place for sharing the cost of emptying it, let alone replacing it. I decided not to proceed due to the timescale- 6-9 months for permit plus costs of at least 2k or replacement- well trh gardens were all tiny, agreement to go under neighbours gardens would have been needed for the pipework. Solicitor said l made the right decision pulling out.

greenwaving

DayDreamerandGeneralWaster said:

I had this on a purchase last year that l pulled out of.

My solicitor was also acting for the lender and an indemnity would not cover it. The only option was to apply for an environmental permit or get it replaced. It was shared between 3 cottages and there was no formal agreement in place for sharing the cost of emptying it, let alone replacing it. I decided not to proceed due to the timescale- 6-9 months for permit plus costs of at least 2k or replacement- well trh gardens were all tiny, agreement to go under neighbours gardens would have been needed for the pipework. Solicitor said l made the right decision pulling out.

Yeah I can understand the complexity of that scenario plus the timescale would likely have made it unworkable. Our situation is a little simpler in that it just requires an upgrade to a treatment plant for compliance. But if indemnity is an issue (which it looks like it will be from your comment and others) I think the likelihood is that the property is unmortgageable in its current condition which likely prevents the purchase anyways. Very disappointing