POINTS OF LAW
My niece moved house and within a month she noticed irregular wall markings which turned out to be water, causing rot in the floor. A major repair is required. She had a homebuyer’s survey to support the purchase which did not identify this as a problem and the sellers did not mention there was a high water table. This has been confirmed by neighbours, who, for some years, have used a ground pump to limit water collection beneath their house. My niece’s insurance company will not pay for a repair and the surveyor denies liability. The mortgage lender commissioned the survey and my niece paid £550 for a report. What should she do? David Fleming writes: With regard to defects such as this, the general rule is still “buyer beware”. The standard property information form does not require the seller to give any information about defects with the property. I am not certain whether two surveys were carried out or only one since you mention that your niece had a homebuyer’s survey but also paid for a mortgagee’s survey. She should have been given a copy of the mortgagee’s survey. The courts have decided that a surveyor commissioned by the mortgagee can, if negligent, be liable to the buyer since he is aware that the buyer will rely on his report.
Unfortunately, professional negligence cases of this nature are invariably complex and expensive. You would have to find another surveyor willing to say that your niece’s surveyor and/or her mortgagees’ surveyor ought to have spotted this problem. Unfortunately, surveyors’ reports tend to contain large numbers of disclaimers making it clear what they have and have not inspected. Moreover, even if you succeeded in proving the surveyor(s) liable, you would not necessarily get back the cost of the repair. In principle, compensation in these cases is the difference between what the buyer paid for the property and what it was actually worth in its “defective” condition.
David Fleming is head of property litigation at William Heath & Co.
I am 65 and own outright a small, semi-detached house in the outer suburbs of London. The other half of the building has been offered to me at a reasonable price. I hoped to buy it by releasing equity on the joint property which I plan to make into a single house. However, my financial adviser said that I am too young for the best deal on equity release. He suggested it would be better to scrape all my savings together to make the purchase and leave the equity release until I am older. What do you think? James Cotton writes: Taking out an equity release scheme on your current home (which is currently mortgage-free) is perfectly feasible. It is also possible to take out an equity-release scheme when purchasing a new property – it does not have to be on a home you already own.
The difficulty with your plan is that you are hoping to secure borrowing on a property that does not yet exist — that is, the new single house. Lenders are understandably cautious about lending on this sort of thing, as they won’t know the value of the new property until it is completed.
However, I spoke to Home & Capital, a specialist equityrelease provider and adviser and it said that this sort of transaction would be possible. Once a scheme was applied for, a valuer would come and look at the properties and assess the likely value of the two combined – they would want to be confident that one plus one equalled at least two.
It is likely that any provider would release a certain sum of money up front to help fund the purchase and then release the remaining funds once planning permission was in place and the conversion ready to start.
As for whether you would get a good deal on equity release, it is certainly true that the younger you are, the less money these schemes provide – the minimum age on many equity release schemes is 60 or 65.
However, it really depends on how much you want to buy the property next door and whether you have alternative funds to do so. If it is something you really want to do, but don’t have sufficient savings, equity release can help fund the shortfall.
It is important that you keep some of your savings for emergencies and make sure you budget for all the conversion work.
Finally, don’t rule out a standard mortgage if you have a decent pension income – many lenders will lend to people in retirement.
James Cotton is a mortgage specialist at L & C (0800 953 0304; wwww.lcplc.co.uk)