Buying, selling and letting - December, 2001

Q I’m about to buy a property and was surprised when my solicitor mentioned something called an environmental report. It shows the property is in an area with a high risk of subsidence. I am tempted to ignore this as I know the house is located where London clay is prevalent and I believe this is what concerns my solicitor. What should I do?

A The Environment Agency of England and Wales, local and other authorities have begun to issue environmental reports to give buyers and sellers information about  land contamination, subsidence, flooding, industrial land use or other potential problems that may affect a property.

As you seem to realise, the environmental report’s findings don’t necessarily mean the property you hope to buy is itself in danger of subsiding. These reports usually cover an area, often a postcode sector, typically 250 to 500 metres around the property in question.

However, any potential dangers revealed by searches or enquiries must be looked into thoroughly so that you know as much as possible about what you’re getting into. It would be worth asking your surveyor whether the property has suffered foundation movement in the past. You should also arrange for a consulting engineer or structural surveyor to look into the possibility of subsidence and produce a report. This may delay the transaction and will probably cost you upwards of £700, but could avoid future problems. Additionally, you should explain the problem to whoever is to arrange the buildings insurance for you. It’s essential you obtain written confirmation from the insurer indicating they are aware of the threat and agree to continue cover.

If it looks like the property has suffered from subsidence or may do so in the future, the usual remedy is underpinning. If you still wish to proceed with the purchase, you should consider using this as a bargaining tool in seeking a price reduction.

Above all, make sure you take all the necessary precautions before and not after exchange of contracts, when it will be too late.

Q I recently decided to put a maisonette I own on the market. I bought it some years ago as a letting investment. My estate agent advises me the property is suffering from physical defects which may put some buyers off. These include damp walls, faulty electrical wiring, loose plastering and woodworm. Do I really have to sort these matters out before I can sell the property?

A Not necessarily – physical imperfections do not have to be remedied in order to put a property on the market. However, the problems you mention will almost certainly affect the ultimate selling price and possibly also the speed at which you can sell.

The law puts the onus on buyers to discover for themselves what kind of condition the property is in. You do have a duty to disclose hidden defects you are aware of, but it’s clear that you have been straightforward with the selling agents.

What you choose to do really depends on how quickly you want to sell the property. Consult at least two estate agents to compare the market value of the property in its present state with how much it might fetch in a better state of repair. This will help you to decide whether it’s more economical to sell the property in its present condition or make the repairs. The choice is yours.

There’s more to decorating a room than meets the eye. For inspiration and advice, take a look at show homes to get a host of ideas from traditional right through to retro chic.

When programmes such as Changing Rooms rule the airwaves, it is no wonder everyone thinks they can be an interior designer. But creating the right look – whether it is contemporary or traditional – is not as easy as the likes of Laurence Llewelyn-Bowen would have us believe.

Stacey Walker, a designer from Alexander James, believes that designing a home is all about stamping your own personality onto the property. ‘Decide what colours you want to use. Do you want to go for a cool, calm look using whites and blues or do you prefer pinks and purples that are a bit warmer,’ says Walker. ‘When considering furniture, the tip is to take your time and never overfill the room. If you can, go and measure up the furniture then draw a floor plan and move things around on paper to get the most out of the space available.’

Creating the look at Sunley Homes’ Port Regent development in Sovereign Harbour, Eastbourne, the team at Alexander James designed a very young and trendy theme using lots of warm colours. The town house show home has a calm aquamarine theme with rattan weave carpets, while the show apartment features the sharp lines of chrome, metal and glass. Customers can also upgrade via Sunley Select and choose Shaker-style moulded doors, matching ironmongery, sleek kitchen worktops and ceramic floor tiling.

The 69 new homes built on the West Harbour at Port Regent start at £125,000 for a two-bedroom apartment rising to £174,950 for a four-bedroom town house. Call Sunley on freephone 0800 085 2222 for more information.

One of the many advantages of buying a new home is that you don’t have to put up with anyone else’s taste. Bringing in the experts to personalise your space to suit your lifestyle and needs is a hassle-free way of creating your dream home. Developers Metropolis and Bryant Homes have created packages to allow the customer a chance to create the perfect home.

At Metropolis the customer can choose from the showrooms of cutting-edge kitchens and bathrooms to find everything from flooring and fittings, as well as consult the interior design team to get a home specifically tailored to the individual’s unique requirements. Call Metropolis on 020 7580 5563.

Bryant Design allows you to turn a standard house type into a home. The customer can browse through the on line catalogue to get a feel for what Bryant can do and sift through the range of products to decide what best suits. Call Bryant Homes on 0121 711 1212.

Ten years ago you couldn’t get a specific buy-to-let mortgage from a mainstream lender. Today, more than 40 lenders offer these mortgages. But, asks Andy Stuart, Editor-in-chief of Your Mortgage magazine, is buy-to-let a safe bet?

According to the Council of Mortgage Lenders there are currently more than 110,000 outstanding buy-to-let mortgages worth £8.3 billion in the UK. And with research from Bradford & Bingley Estate Agents revealing that some landlords are earning returns of up to 10 per cent a year, it appears that buy-to-let has been an unequivocal success for borrowers as well as lenders.

However, speculation about a possible recession means that the future may not be as rosy. After a disastrous first half-year for the stock market, the terrorist action in the United States threw the financial picture into even more disarray. In reponse to these events, the Bank of England’s Monetary Policy Committee (MPC) – concerned by the possible effects of a global slowdown – has cut interest rates six times this year. Fears of a recession in the US are very real and, as the saying goes, whenever our colleagues across the pond sneeze, we catch the cold. So is buy-to-let still a safe investment in the light of this uncertainty?

The stock market reacts more quickly than other economic indicators. So the frailty of the FTSE this year could result in a house market crash next year. ‘Property prices can move in the same way as the stock market, so there is every chance things could turn sour,’ says Mark Harris, director of Savills Private Finance. ‘If the market crashes, buy-to-let investors could be in trouble if they have not put something aside because their money is tied up in the property.’

But low-interest rates are actually very helpful for people who are looking to buy – and with mortgage rates at their lowest level for almost 40 years, shouldn’t now be the perfect time to enter the buy-to-let market?

‘Buying to let is still extremely popular and we expect this to continue,’ predicts Roger Hillier, product development manager at Mortgage Express. ‘Of course there have been noises about an economic downturn but if this happens I don’t think the market will be affected.

‘The demand for rental accommodation continues to outstrip the supply and with first-time buyers waiting longer before they get a mortgage, this also means that more people will continue to rent. Even if there is a recession and a landlord lost their job, a buy-to-let mortgage is assessed on the expected rental income, so as long as this covered the loan payments and maintenance costs there wouldn’t be a problem.’

For the right person in the right circumstances buying to let can be a good investment, but you have to be in it for the long term. Don’t expect instant returns – and bear in mind that the property market could turn and rental levels may fall as well as rise. These potential pitfalls might not suit those who are looking for security.

However, if you do take the necessary precautions, many of the everyday problems associated with a buy-to-let investment can be overcome. Before you plunge into this market make sure you research all your options thoroughly. There may be rough times ahead, but the long-term future could still be very profitable.

As property prices have gone sky-high, many in London and the South East have had to find unusual ways to become property owners. Shared ownership is one way to help those who have been priced out of the open market.

Shared ownership enables people to buy a significant share (typically between 30 and 50 per cent) in a home with the opportunity to purchase some or all of the remainder as and when they can afford it. Along with a monthly payment towards the share of the purchase, shared ownership buyers also pay a subsidised rent to the owner of the remaining share of the property, usually a housing association (also known as ‘registered social landlord’). The monthly costs are more affordable with shared ownership than with buying outright – and the buyer is able to enjoy the day-to-day benefits of owning immediately.

Housing associations offer shared ownership schemes on a variety of property types, both newly built and previously owned. New home builders routinely work alongside housing associations to provide homes, some of which are made available as part ownership schemes.

This type of scheme benefits not only those it enables to buy property; as people move from council tenancy on to the property ladder, local authorities are better able to keep up with demand for council-owned rented property by those who would not be able to afford even part ownership. In addition, the services a community relies on in turn relies on workers to deliver them. The lack of housing is a threat to the well-being of everyone, whatever their own financial situation.

A particularly inventive type of shared ownership helps people build a better future – literally. The self-build shared ownership scheme, as offered by the Boleyn & Forest Housing Society, aims to help people afford a home who otherwise would not have been able to – and to encourage those who are prepared to meet their housing needs through their own endeavours.

The scheme enables people to acquire an approximate 25 per cent share of a property through their own labours known as ‘sweat equity’. They may also need to obtain a mortgage or have sufficient savings to acquire a further approximate 25 per cent share of the property. They would pay a subsidised rent on the share of the property that they do not actually acquire, as they would then be a shared-ownership home owner.

The Boleyn & Forest Housing Society presently offer three self-build schemes in London – in Beckton, Docklands and Bow. Applicants must either be first-time buyers or must require alternative accommodation but not be able to afford to move without the assistance of shared ownership. Preference for these schemes will be given to residents of the borough where the scheme is located, and those with trade or DIY experience are also given priority.

Quick contacts

Housing Corporation
020 7292 4400 (London office)
020 8253 1400 (South East office)

Boleyn & Forest Housing Society Limited
020 8472 2233

Metropolitan Home Ownership
020 8920 4444

Acton Housing
020 8840 6262