The Rise and Fall of Iceberg Mansions

"Beware! Iceberg Ahead"

For owners of townhouses, the opportunity to increase the footprint can be a challenge as outside space is typically at a premium.  The is particularly true when you look at homes located in wealthy London boroughs where not only is outside space limited but also planning restrictions are commonplace, and it therefore requires some innovative thinking when it comes to dramatically increase living space.

In recent years, we have seen a rise in planning applications for subterranean developments, where architects (who are literally thinking ‘outside the box’) create plans for huge underground extensions of single, double or even triple storey basements in order to add significant square meterage to their clients’ homes.

Also known as ‘mega basements’, these extensions have become increasingly popular, yet are also creating a stir with many applications being disputed by neighbours who are concerned about development occurring below their own properties (not to mention the disruption caused by the huge excavation work).

Only this week we saw an article published about a £15m Kensington townhouse that had been painted in red and white stripes, mimicking the style of a beach hut, in an alleged protest to neighbours who disputed a planning application for such a development taking place at the home.

While some councils are now starting to put new rules in place to restrict the extent of basement plans, it does highlight the point that when you’re about to embark on the purchase of a new home, it pays to do your homework to understand what planning applications have been submitted that could impact on your own property.

Landmark’s PlanSearch Plus provides an overview of residential and commercial developments and planning applications that may have a significant impact on the property being purchased.  It also includes other pertinent neighbourhood data, including the Local Development Framework (which will indicate where new applications may be made in future), information regarding schools, population demographics, housing types, average prices and a summary of key local amenities.

By reviewing PlanSearch Plus as part of the conveyancing process, purchasers can be are forewarned about any potential developments that could infringe not only on the enjoyment of their new home, but also its future value.

After all, just because one can’t see any visible signs of development, with iceberg homes growing in popularity, you never quite know exactly what’s happening beneath the surface.

Whose Responsibility Is It Anyway?

From 26 April, the Mortgage Market Review comes into force, and brings with it stricter affordability rules.  As such, it increases lenders’ obligation to determine affordability – both now and in the future.

Some worry however that the rule change may see mortgage application fraud rise, in avoidance of more rigorous checks.  For those with income verification worries, there is concern they may target alternative mortgage products.

With self-certification ended, we have been warning clients to ensure that they incorporate strict fraud alerts on unregulated loan business.   In fact, Buy-to-Let is increasingly being mooted as the potential ‘replacement’ to self-certified loans; a straw poll by a broker magazine asked its readers whether any clients have attempted to buy property for residential purposes via a buy-to-let mortgage.  Out of 275 responses, 52% had witnessed such attempts.

Systems are in place with many lenders to detect this activity, however it is important that the industry remains vigilant. But who in the property purchasing chain is actually responsible for policing or reporting related concerns?  Where does the responsibility truly lie?

Estate Agents

At the start of the process, Estate Agents are in an ideal position to gather information on the purchaser and the property, including its potential for rental, and to understand how the purchaser intends to use the property.  Once a purchase proceeds the agent is less likely to be involved in the financial transaction – unless the applicant happens to use their in-house financial advisor.  Perhaps there is scope to incorporate feedback from agents in the process, so their initial findings can be analysed?  As unregulated professionals this may be a long shot, but there’s no doubt that most agents will know the purpose of a given purchase.

Brokers

Mortgage brokers are often considered to be in the ‘hot seat’ as it is their recommendations that will be adopted by the applicant in terms of which mortgage product they should opt for. It is therefore up to brokers to extract enough information on the applicant, their intentions and plans for the property plus their relevant financial history, to make an accurate judgement.  Brokers have a duty to report any suspicions they may have, whether related to falsified ID or income data.  We are seeing lenders tightening up their management of broker panels with some refusing to accept further business if fraudulent applications are submitted.   

Surveyors

We've spoken about the surveyor community as being the ‘eyes and ears’ of the industry, and believe they are in a strong position to identify any suspicious activities. Surveyors not only meet the current occupant during the valuation but also physically assess the property.   We believe this places surveyors at the heart of the risk management process and in a prime position to identify factors that may add up to a fraud referral when combined with other information sources.

Conveyancers

As the last line of defence, legal conveyancers have a responsibility to ensure the transaction is fully transparent.  As ‘gatekeepers’ of the mortgage process, conveyancers undertake detailed identity verification checks, have a view of the source of funds, and also have an insight to the property, including a range of detailed property search information. 

There has been some interesting debate over whether the data available to conveyancers could be used earlier in the purchase process, with obvious benefits for instance if lenders were able to make use of Land Registry charge information when deciding how to value a property.

Lenders

Lenders are of course at the heart of fraud detection and prevention with their profitability directly affected by bad lending, and now a strong focus from regulators not only on their processes and controls but also on capital requirements for different categories of lending.

Fraud teams walk a tightrope between ensuring that the customer journey for the majority remains smooth and trouble free, whilst at the same time investigating as many cases as possible, making it genuinely tough to gain approval for a mortgage when criteria are abused or significant suspicion persists.

The IT systems which today form a key part of lenders’ defences aid this process by analysing every potential loan at various stages, from the moment of application through valuation and even the conveyancer’s certificate of title process.

By analysing both applicant and property data – for example, looking at previous loan applications or the property’s transaction and listing history – risk systems can work together to issue alerts if the application meets specific criteria, as determined by the lender. Detailed investigations can then be undertaken by the lender’s fraud team before the application is allowed to proceed.

What this shows is that there isn't a definitive single body that is responsible for policing, detecting or reporting cases of fraud, and whilst lenders are clearly driving the process from the centre, each ‘link in the chain’ has the ability to influence the overall strength of the anti-fraud toolkit. 

Knowledge in this arena clearly equals power, and the provision of new data driven solutions that intelligently analyse all facets of the proposed transaction will enable the entire industry to make better informed decisions – first time, every time.

Richard Groom

Product Development Director

Financial Risk - Landmark Information Group

Subsidence - Advice for Conveyancers

In his latest blog, Andy Lucas, Managing Director of Property Assure, looks at properties that have been affected by subsidence and the key documents Conveyancers should be obtaining.

The Valuation Survey includes questions pertaining to evidence of movement and subsidence.  (It should be noted that the Valuation Surveyor is not equipped to identify whether the property is at risk of subsidence only if there is evidence of its occurrence – but we’ll revisit this in a later blog).  Where historic subsidence repairs have been identified the Conveyancer should obtain the supporting documentation to verify that any repairs have been undertaken accordance with the Building Research Establishment (BRE) subsidence classification and repair guidelines and or whether an insurance claim was made by the vendor.

There are 2 main documents that should be obtained:

·         It must be remembered that a significant proportion of subsidence repairs do not require underpinning of the foundations.  However, if any underpinning has been carried out it is a notifiable operation under the Building Regulations and as such, inspections and sign off by the Local Council Building Control Officer should have been carried out.  A formal Completion Certificate should be issued by the Council at completion.

·         Where the repair has been undertaken as an insurance claim, the insurer appointed Building Surveyor / engineer should have produced a Certificate of Structural Adequacy.  This is issued under guidance of the Institution of Structural Engineers (1994) although there is no actual contractual or legal requirement for one to be provided and it is not a guarantee. 

So in the event that previous subsidence is identified you should look to obtain the Completion Certificate issued by the Local Authority and Certificate of Structural Adequacy issued by the engineer/ surveyor who specified and periodically inspected any repairs under an insurance claim.   They should both be available from the Property Owner

The first step is to understand your subsidence risk.  If previous cracking or subsidence has been identified it is always worthwhile appointing a Building Surveyor / engineer to undertake a specific check on the property and review any supporting documentation and thereafter identify whether specific further investigations are required (soil samples, monitoring etc). 

Visit www.subsidencesupport.co.uk for more guidance and advice on Subsidence.

Andy Lucas

Managing Director

Property Assure Ltd