Duncan Lewis

Legal Aid

Lawyers London

Subsidence a real risk needed to be checked during due diligence

Date: (21 November 2012)    |    

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Conveyancing solicitors and licensed conveyancers who fulfil due diligence requirements have to take into consideration the risk of subsidence ( motion of a surface where the earth surface shifts downwards to a related fact such as sea level) which affects one in five homes in the UK with more than £200-£250m per annum spent on subsidence claims.
Similar number of insurance claims is also made annually for subsidence as is being done for flood.
Though so much money is lost in such claims thorough checks or a property’s subsidence risk are not carried out as a standard procedure during conveyance process. This could result in homebuyers purchasing properties without realising the risks or understanding the impact upon the value, insurability and sale ability.
With European research predicting more than 50% increase in subsidence over the next 30 years alone and not an issue which was going to go away Council of Mortgage Lenders advises conveyancers that they must carry out any other searches which may be appropriate to the particular property according to the location of the properties.
Causes for subsidence could be many and local knowledge may not be completely relied upon. Such a problem may not have previously taken place in a particular location but it’s no guarantee that in the future it wouldn’t happen.
Drainage leakage alone, for example, accounts for over 15% of all subsidence claims and the planting of unsuitable trees and vegetation was another major cause. And other extensions constructed or erected on the same standards of the existing house was also reason to the effects of subsidence.

Without proper checks, property and legal professionals may be unaware of such alterations and the resulting impact on a property.

The buyers have to be made aware of the risks of a property they are thinking of buying. If their property subsequently experiences subsidence and a claim must be made, this will need to be disclosed in subsequent insurance renewals and will impact insurability and premiums.

Furthermore, claims must be revealed when selling a property, which may affect the ability of a potential buyer to secure a mortgage on the property.

Conveyancing solicitors and property experts will have to ensure providing a comprehensive service for clients when they conduct due diligence so that their clients have the peace of mind that all checks have been carried out and that no hidden surprises would be revealed once the buyers move into the property.

Subsidence has been described as a silent natural disaster and represents the largest ground stability risk in the UK. It affects a vast number of homes throughout the country and is a great drain on the economy; typically the same number of insurance claims is made annually for subsidence as for flood. Over the last 10 years, subsidence has cost the economy an estimated £3bn.