If you are planning on selling your house or changing your home insurance provider and have had a problem with subsidence in the past, you may be wondering if you have to declare it.
So, do you have to declare subsidence?
You have to declare subsidence to prospective buyers and your insurers, even if it is historic. Failure to declare subsidence to your insurer could invalidate your home insurance policy, and you could face a misrepresentation claim if you conceal subsidence from your buyers.
In this article we will explain when you should declare subsidence problems, how you should declare it and who you must declare subsidence to.
We will also explore the consequences you may face if you deliberately conceal subsidence problems from prospective buyers and home insurers alike.
Have a subsidence issue and thinking about selling? I designed the short quiz below to help you determine the best way forward.
1. Do I need to declare subsidence to prospective homebuyers?
If you are selling a house with subsidence, you should always disclose if your property has suffered, or is suffering, from subsidence.
Although it is the buyer’s responsibility to assess your home before purchase, there is little point trying to conceal subsidence problems.
It’s best for all parties involved if you disclose full details of the property’s subsidence history at the earliest opportunity. The benefits of being fully transparent from the outset include:
- All parties are aware of all the facts from the outset and can decide whether they want to proceed with the sale.
- Builds trusting and proactive working relationship with buyer and buyer’s solicitor.
- Whittles prospective buyers down to those who are motivated and are not fazed by historical subsidence.
- No time wasting, as you won’t be stringing buyers along. If they do decide to pull out because of the subsidence, it will be early enough in the process for there to be minimal impact.
- Minimises the risk of breaking a property chain later down the line if you find your dream onward purchase and the buyer then pulls out of your sale due to the discovery of subsidence.
Ultimately, the discovery that you have tried to hide the problem can cause a breakdown of trust and may even cause the buyer to walk away from the sale.
1.1 Can a buyer find out my property has subsidence if I don’t tell them?
It is highly likely that a buyer will discover any subsidence issues even if you don’t disclose details. There are plenty of opportunities for the buyer to discover that the property suffers (or has suffered) from subsidence during the transaction, including:
- Coal mining and mining searches*. The buyer’s solicitor will undertake a number of property searches to uncover any potential issues with the property before a buyer commits to the purchase. A coal mining report will flag if the property is within 20 metres of any areas previously used for mining, which can put a property at risk of subsidence.
- Environmental search*. Another search carried out by the buyer’s solicitor on behalf of the buyer is an environmental search. The environmental search will highlight any environmental risks which affect the property and surrounding area, including ground stability and subsidence.
- Homecheck Mining and Subsidence Report*. If the Environmental Report flags any concerns regarding subsidence, then the buyer’s solicitor might recommend the buyer obtains a Homecheck Mining and Subsidence Report. This report will flag if the property is built in an area affected by subsidence due to soil shrinkage and will give the property a risk rating.
- Survey reports. A chartered surveyor may flag suspected subsidence in a Home Buyer Survey or a Building Survey. Chartered surveyors are not qualified to say if a property has subsidence, but they can recommend that the prospective buyer should obtain a structural engineer report to confirm if this is the case.
- Structural engineer reports. Structural engineers are qualified to assess the property and confirm to the buyer if it has current or historic subsidence problems, or if the property needs to be monitored for signs of subsidence if it isn’t clear.
- Problems obtaining home insurance. Any previous subsidence claims made on your home insurance may be flagged to the buyer when they go to arrange their own insurance cover. This information will be available to insurers on a central insurance database.
*While the property searches don’t actually confirm if the property suffers from subsidence, it will flag the risk to the buyer and buyer’s solicitor. The buyer will then ask their surveyor to take a closer look for any signs of subsidence. If the surveyor suspects there is subsidence, the buyer is probably then going to instruct a structural engineer to attend the property and carry out an assessment which will give them a definite answer.
So now you know that you really should disclose details of any ongoing or historic subsidence to prospective buyers, let’s take a look at what information you should be providing…
1.2 What information should I disclose to potential buyers?
The Seller’s Property Information Form (TA6) is a legal document completed by the seller to give prospective buyers detailed information about the property.
Section 5 of the form requires sellers to provide details of any building works carried out. This includes:
- underpinning (5.1(h))
- other remedial works (5.1(i))
- any claims made under a guarantee or warranty that relates to the work undertaken
You will need to disclose details of any claims made on your buildings insurance for underpinning or other subsidence remedial works in section 6 of the form.
Along with Form TA6, it would also be beneficial to provide the buyer’s solicitor with the following documents:
Although things like obtaining a quote for the costs of remedial works aren’t required, it can be a good way to show prospective buyers what they’re taking on and help them to adjust their offer in a fair and reasonable way.
Prospective buyers may struggle to find home insurance from regular insurance companies on a property that has a history of subsidence. Be ready to respond to their enquiries by doing a bit of homework beforehand so you can offer them helpful suggestions.
Better yet, if you are selling a property with ongoing subsidence, contact your current insurer and see if you can get their authority to transfer the claim to the new buyers. The buyers will be spared the costs of the remedial works and so will be able to offer you a higher price in return. Just remember to agree who is going to pay the insurance excess.
2. Do I need to declare subsidence to home insurers?
If you suspect or discover that your property has subsidence, you will need to inform your insurer as soon as you become aware of the problem.
You also have a responsibility to inform your insurer of any subsidence issues when you first take out your policy and each time your policy renews. In their article on Misrepresentation and Non-Disclosure, the Financial Ombudsman Service confirms that “the customer…has to take reasonable care not to make a misrepresentation”.
Your insurer will advise you on the next steps, depending on the severity of the damage. They may wish to monitor your home over a period of time to determine a long-term solution.
The majority of insurers will continue to provide subsidence cover on your property after a claim arises, provided that the repairs have been carried out under their direction and/or have been approved by your insurer.
You will need to be prepared for your excess and premiums to rise, though, after making a subsidence claim.
2.1 What information should you provide to an insurer if you are trying to get insurance on a property with historic subsidence?
In some cases, your current insurer will not be able to offer you continuation of cover and so you will need to find alternative cover. The Association of British Insurers recommend that you consider using a specialist broker if this is the case.
If you are trying to get insurance on a property with historic subsidence, you should provide your insurer with the following information and supporting documents:
- When the property was affected by subsidence.
- The cause of the subsidence.
- The measures taken to fix the problem.
- Whether the structure was completely or partially underpinned.
- Details of any further ground movement since the work was completed.
- Details of any claim(s) for subsidence repairs, including the date(s) the claim was made and how much the claim was for.
- Copies of any structural building surveys, home buyers reports, Certificate of Structural Adequacy and structural engineer reports (if available).
2.2 Is there a time limit for having to declare a previous subsidence claim to your insurer?
For most insurance policies, there is a time limit for having to declare a previous claim. For example, car insurance claims usually need to be disclosed for up to five years after the claim.
There is no time limit when it comes to disclosing subsidence claims, so even if the subsidence claim was made 20 years ago, you should still disclose it to your insurer.
3. What are the consequences if you fail to disclose subsidence to a potential buyer or your insurer?
There are some pretty serious consequences if you fail to disclose subsidence to prospective homebuyers or your insurer:
We'll explore each of the consequences in a bit more detail below. But if you are trying to sell a house affected by subsidence, this free quiz we've designed for you should help:
3.1 Loss of trust
If you aren’t completely open and honest with prospective buyers and they later discover that the house has subsidence, buyers may begin to question what else you are trying to hide from them.
This can cause further delays as the buyer and their solicitor are likely going to raise further enquiries regarding the subsidence, which could have been dealt with at the outset. A buyer may begin to lose patience if the process drags on for too long.
The loss of trust may also mean that buyers are less likely to work with you to come to a fair solution if they feel they’ve been lied to.
It is highly likely that the buyer will seek to negotiate a reduction in the sale price to take account of the subsidence, any remedial works and knock-on effect this will have on the future saleability of the property. A buyer is much more likely to compromise on the sale price during negotiations if they’ve been provided with all the facts from the outset.
3.2 Buyer walking away from sale
If the sale has not yet gone through when the subsidence issues come to light, the buyer may refuse to proceed with the sale.
If the buyer pulls out this late in the process, you will have lost out on time and money and potentially your dream onward purchase if it causes your house chain to collapse.
3.3 Misrepresentation claim
You could face a claim for misrepresentation if you tell a buyer there are no defects with the property in the Seller’s Property Information Form, and the buyer subsequently discovers there are subsidence issues.
You would have to pay the new owner damages if their misrepresentation claim is successful. The damages would be equal to the difference in value between what a buyer would’ve paid for the property knowing it had subsidence and what they actually paid for it (on top of any legal fees).
Choosing to conceal information from prospective buyers can be an expensive mistake.
3.4 Charging more for a policy
If the insurer would’ve still offered you the policy, had they known about the subsidence, but charged you more for the policy, the insurer may only cover you for the proportion of the premium you paid.
For example, if you paid a £100 premium, but you should’ve paid £200, you’ve actually paid one half of the premium. So, your insurer will only cover you for one half of the claim.
3.5 Offering different terms
If the insurer would’ve still offered you the policy, but on different terms, the insurer can retrospectively apply those terms if it’s found you didn’t take reasonable care when answering the insurer’s questions.
This could mean that your subsidence claim is no longer covered if you now no longer meet the extra conditions retrospectively applied to your policy by your insurer.
3.6 Insurance can be void/invalid
The worst-case scenario is if your insurer decides to void your insurance policy on grounds of material non-disclosure.
Your insurer is entitled to void your home insurance policy if they wouldn’t have offered you the policy in the first place had they known about the subsidence issues that you failed to disclose.
The Financial Ombudsman Service state that “the policy will be cancelled from the date the misrepresentation occurred”. This can either be at the start of the policy or a later renewal if the subsidence problem occurred after you took out your policy.
If you deliberately give your insurer incorrect information, the insurer may not even have to refund you for any insurance premiums you have paid. You’ll be left out of pocket and might have to find up to £50,000 to fix your subsidence problem.
4. Do you need help selling a property with subsidence?
Selling a house with subsidence can be much harder and take a lot longer than selling a problem-free property. For many, selling by auction will be the best solution as it can offer a faster and more certain sale, and potentially a better selling price.
Over the last few years, I have spoken with and helped many dozens of people with both ongoing and historic subsidence issues of different severities and causes.
I tried to consolidate all that experience into a short quiz you can take (for free) right now. Hit the button below to get started.
By Matthew Cooper, Co-Founder of Home Selling Expert