This is an often asked question by a purchaser of a residential property whether they are first time buyers or an experienced purchaser. There is really only one answer that a purchaser solicitor can give to this question and that is a resounding “yes”. That applies every time the question is asked and is also irrespective of the age or condition of the property.
With an older property, it is much more relevant to obtain a survey but what about a new build property? Is it needed? Surely not if you have the comfort of the Building Agreement, a Building Control Completion Certificate and the much publicised 10 year Guarantee. However, there can still be construction issues with the workmanship and the quality of the material. There is currently a major issue with some properties in the Donegal area regarding the quality of the cement and bricks that were used with the construction of the houses. Also, guarantee providers can go into administration as this has happened recently. I still feel that the purchaser needs to be advised that they should consider obtaining a survey even for a new build. Many purchasers will not heed this advice but that does not mean that the advice should not be given.
“So why should a purchaser bother to get a survey and what does it cover?”
Firstly, the price. Part of the survey should confirm if the agreed price is the current market value of the property. This is also relevant for a newly built property. The surveyor normally makes comments on the value and to do so, he needs to properly compare the property proposed to be purchaser with similar properties in the area. In a greatly fluctuating market, this can be particularly important.
Secondly, the survey should cover in detail the current condition of the property. The Home Buyers Report is particularly well set out in this respect, with its one, two, three system which is very helpful in highlighting not only what defects have been spotted but how serious they are.
The second most commonly asked question, once the survey has been completed, is “Do I need to get any other reports or estimates?”. Again, the solicitor must always respond with a resounding “yes”. The reason for this is that the survey rarely quantifies the exact cost of any repairs. Sometimes the surveyor will ball park an estimate of the cost of the repairs but this could be an inaccurate and does not contain significant details of what is required and what this would accurately cost to remedy.
The main reason for carrying out this further investigation is so that the purchaser is in an informed position to enable them to reconsider if the price they originally offered, that was agreed by the vendor, is still good value for the property. If the purchaser fully embraces this task, they will then fully discover the full extent of the current condition of the property and the cost of rectifying any repairs required.
The purchaser then is in a fully informed position to reassess the transaction, to consider if the agreed price is fair and reasonable given all the information the purchaser has now obtained. The purchaser can either proceed with confidence that the price agreed is satisfactory, or they can withdraw their offer because of the poor state of condition of the property or the prohibitive expense in repairing or rectifying the defects highlighted in the survey.
Often there is a need for a renegotiation of the price in these circumstances and this can be very disappointing for the vendor, purchaser and the estate agent. There is no regulatory or formal way for this to be done. I would normally advise that to do this properly, the purchasers should be able to produce a proper survey and back it up with quality estimates and reports. If this is then presented openly and fully, it is more likely that the vendor and the estate agent would give this information proper consideration.
For the purchaser, it helps for them to mention to the vendor and their agent that the issues have arisen and estimates were not known by the purchaser at the time their offer was accepted. As for the vendor, they should be reminded that if they do not consider a renegotiation, there is always the possibility that the same issues could reappear if the property is re-agreed sometime in the future. In most cases, if this process is adhered to then the price is adjusted fairly for all parties and the sale quickly proceeds to completion.
The purchasers third most often asked question is “What type of survey should I get?”. Cost is a major issue for the purchaser which I consider strange as often an excellent inspection and report can save the purchaser thousands of pounds but purchasers do not like to spend on this unnecessarily. There is a perception that the survey is not really relevant or needed. This perception is, in my opinion, wrong.
The cheapest option is the purchaser deciding to use an “Expert Friend or Relative” to carry out an inspection and report on the property. This option is often free and is fraught with difficulties. Firstly, it is unlikely to give any comfort to the purchaser on price and also if the report (whether verbal or in writing) is defective, the purchaser is unlikely or willing to sue their friend or relative. These negatives need to be highlighted in the hope that it would persuade the purchaser to get a proper survey.
Some surveyors provide a cheaper service in completing a basic valuation or survey which is not a Home Buyers Report. It is usually a two page report that adequately highlights defects and comments on the price. They are quite rare but they are worth mentioning to a purchaser who is very cost conscious or is considering not getting any survey done at all.
Currently, the most common option taken by a purchaser, particularly if they are borrowing, is to rely only on the lender’s report. One of the new issues with this decision by the purchaser is that the solicitor and the purchaser do not actually see the report. The UK Finance Handbook is not particularly clear on this issue. It appears that the purchaser solicitor is no longer now obliged to obtain a copy of the lender’s report and therefore flag up any issues contained in the report, as some lenders have indicated that this is no longer a requirement by the purchaser solicitor. I am not sure why this change has evolved. The purchasers should be advised on no uncertain terms, that the lender’s report is their report, and should not be relied on. They should be further advised to obtain an independent report so it can be relied on and will provide both comfort and protection if it in itself is defective.
The report I strongly recommend to purchasers is the Home Buyers Report. It is very detailed and also has a legal section. This section is extremely helpful in flagging all sorts of issues that the purchaser solicitor may not have been made aware of. It points up obvious things like alterations carried out to the property and whether or not the vendors solicitor has the necessary statutory approvals but also less obvious things such as flooding, whether the property has a septic tank, evidence of Japanese Knotweed etc.
On occasions, I would get a request from a purchaser client to recommend a surveyor and most solicitors would have a number of surveyors they would recommend to their purchaser client. On occasions, particularly when someone is moving back from England to Northern Ireland, they may want to get a structural survey. My view on this is that a structural survey is a requirement if a survey indicates that there is a structural issue such as evidence of subsidence or movement of any sort. I do not necessarily believe that in every transaction the purchaser should obtain a structural survey. Structural surveys are more commonly obtained when there is a specific issue that has arisen either in a previous prepared valuation report or another survey.
The main reason why I have considered this topic for this article is that I have encountered a number of surveying related issues in the last twelve months, most of these issues have been significant and thankfully all have been discovered prior to my purchaser client completing the purchase of a property. There is nothing worse for a purchaser to discover an unknown defect in the property after they have completed the purchase and in most circumstances they will not have a comeback against the vendor as our conveyancing system still operates under the doctrine of Caveat Emptor.
From a risk point of view, it is imperative that the purchaser solicitor is clear and unequivocal in giving the advice to the purchaser not only that they need to get an independent survey but preferably a Home Buyers Report.