Subsidence & Insurance (leashold)

Grut · 12 October 2019 at 11:00AM

Hello,

I have been reading about subsidence for the past week or so, yet I am still in doubt.

I felt in love (maybe that’s the issue) with a 2 beds ground floor flat (leasehold) in North West London. It’s been recently modernised (2016) and offer all i am looking for (open plan, garden etc).

Because it’s “new” it has a “wow” factor that makes it Very attractive (and therefore pricey). It was on the market a year ago but did not sell (too expensive apparently). It was put back on the market this year with an asking price 8% below what it was a year ago. I put an offer 2% below the lowered asking price and it was accepted.

Things got complicated when searches showed that the flat was partially underpinned back in 2001 following tree-induced subsidence.

Because it was so long ago, i don’t think getting a mortgage will be a problem (will know soon). However I am, like many others, concerned about resale. Because I too have been searching the internet to decide whether it was a good idea.

Also, for this 3 stories Victorian house (3 flats) the freeholder get charged £2,800 in building insurance (£1k excess on subsidence). This seems very high (my share will be £1.2k).

Any thoughts?

Thanks a lot

eddddy · 12 October 2019 at 11:59AM

Insurance might continue to be more expensive, and some buyers might feel a bit nervous - like you do.

The general rule with property is that problems should be reflected in the price. So perhaps this flat should be a little cheaper than similar flats with no problems.

And perhaps, when you sell, you'll again have to price the flat a little lower than similar flats.

Although as more years pass since the underpinning, buyers might become less and less worried.

You also have to assess (guess) things like how insurers will view underpinned properties in future - will they get less or more nervous about them?

I'd say that, currently, some insurers are becoming less worried about historic underpinning and subsidence, and offering more competitive premiums. But who knows if that trend will continue.

Grut · 12 October 2019 at 12:13PM

Thanks. The issue I have is that there is no way for me to compare this flat to any other in the neighborhood given its unique attributes.

It is more expensive than a typical 2 beds but because it has a relatively large garden and is almost brand new, i can’t really compare.

It is for me unbelievable that subsidence, especially when it’s been dealt with, can remain an issue for banks, insurers and buyers. It just does NOT make sense...

cattie · 12 October 2019 at 2:03PM

As somebody who bought a house that had had remedial work done a year or so previously due to tree roots, I'd never buy a property again that had even a whiff of subsidance issues. I was a cash buyer, no mortgage required but when I came to sell the property 5 yrs later to downsize, I really had to take a hit on the price as most interested parties were worried about the dreaded S word.

If I were you I'd look elsewhere. You'd probably be paying a premium for a flat that has been 'done' anyway & it'd likely be more cost effective to find a flat that needs a bit of work that you can put your own stamp on & end up with exactly what you need.

Grut · 12 October 2019 at 7:05PM

Thank you. Since it’s been 20 years since the remedial work was performed, I feel that maybe the “hit” would not be as painful as it could be if the underpinning was done a year ago.

May i ask you what kind of hit you took? Also were you aware of these issues before buying?

starving_artist · 12 October 2019 at 7:23PM

We had minor subsidence caused by tree roots which hiked the premium up for about 15 years but it has now fallen out of the calculation. Tree roots though can be an ongoing problem unless the tree is removed and if it is in the street the Council is more likely to be required to maintain it better. Even so cracks began reappearing after the exceptionally hot dry summer last year. We won't be claiming on the insurance this time. It's cosmetic so is really more cost effective to redecorate.

Tom99 · 12 October 2019 at 8:01PM

Make sure the garden is within the exclusively demised area of the flat and that you compare the lease plan with the actual garden size. I have known then to differ substantially.

Grut · 12 October 2019 at 8:37PM

Thank you again.

There in only one (relatively big) tree left in the garden. I found a picture online dating back in 2003 and at that time the garden (and the flat) was a mess. So I am assuming that the problems came form all these smaller trees which have been removed.

I feel that a house that has been underpinned should better withstand the ever weirder weather. Yet, it costs more to insure and is less desirable. This is beyond me...

dotchas · 12 October 2019 at 8:45PM

The insurance seems very high. I own a property that we had underpinned about 5 years ago and my (landlord) insurance is only £366 this year. OK its a 3 bed bungalow but still yours seems very expensive. You can still shop around with a history of subsidence.

Grut · 12 October 2019 at 9:58PM

Thank you.

The issue is that as a leaseholder, i have no bearing on the insurance policy. It sits with the freeholder.

I am surprised that the cost is still elevated after almost 20years..

eddddy · 13 October 2019 at 12:22AM

Grut wrote: »

I am surprised that the cost is still elevated after almost 20years..

The high premium might also be because of claims history.

Blocks of flats are 'notorious' for escape of water claims (i.e. a leak in an upstairs flat causes damage to flats below).

And freeholders generally need terrorism cover, which is expensive.

And if the leases allow letting, the insurance cover has to include letting - even if no flats are actually being let at that time.

Also, I think that leasehold flat owners might make insurance claims more readily than house owners - because you're claiming off the freeholder's policy, rather than your own. So it seems more remote.

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Subsidence & Insurance (leashold)

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