Buying a Property – Part 1 – The Limitations of a Mortgage Lender’s Valuation

A Mortgage Lender’s Valuation is for the lender only and should not be relied upon by a purchaser as a means of accurately assessing the condition of a property

Source: http://www.guardian.co.uk

Buying and selling of property can be one of the most daunting experiences of our lives.  The complex process of dealing with Solicitors, Surveyors, Estate Agents, Mortgage Providers, Vendors (the person/s selling the property) and the like is something that the vast majority of us do not undertake on a regular basis, and is therefore something that often proves to be very stressful.  First time buyers in particular will often feel overwhelmed by the whole process and will rely heavily on their advisors to guide them through the process.  Once a decision has been made to purchase a property, buyers will work out their finances and decide how much they can afford to borrow and then try to secure a mortgage or at least a mortgage guarantee before beginning the process of house hunting. 

For most of us purchasing a property will be the largest financial investment we will make in our lives.  It is therefore essential that we know exactly what we are buying before we exchange contracts because it is at this point that a property comes into your legal ownership. At exchange of contracts the law assumes that you have made all of your enquiries and that you are fully aware of what you were buying.  If subsequently you find problems with the property, then these problems become your responsibility to deal with (unless you feel that you have been advised inappropriately and that you can prove this). It is therefore advisable to be as thorough as you can be to establish the full extent of any issues with a property before you exchange contracts.  A range of different surveys can be carried out during the conveyance process for which the inexperienced, particularly first time buyers often do not understand the purpose or scope of the range of different surveys available.  For clarity, this article will consider conveyance in respect of a residential dwelling.

Source: http://www.thisismoney.co.uk

Firstly, if you apply for a mortgage, a valuation inspection will be carried out by the lender on the property you are considering purchasing.  Do not be misled by this inspection.  This is for the lender and not the purchaser. The purpose of the inspection is for the lender to be satisfied that in the event that you default in some way on your repayments then in a ‘worse case scenario’ they will be able to sell the property and re-coup the money they have borrowed to you.  This is all about the lender assessing their risk.  These types of inspections are not intrusive and in fact they are extremely brief and in most cases are completed in approximately 20 to 30 minutes.  The ‘Valuation Surveyor’ will make a brief internal inspection looking in the roof space if possible (usually from the top of a ladder). The inspection will also look for visible signs of timber decay or woodworm, and also consider the electrical installation amongst other things.  This will be followed by an equally brief external inspection where the roof, chimneys, external walls etc will be inspected.  As the Surveyor undertakes the inspection, a two or three page proforma, mainly consisting of tick boxes will be completed. The ‘report’ will then be returned to the lender and will identify whether the property is worth the agreed sale price and also detail any urgent remedial works.  It is from this report that the lender will decide whether they will borrow the agreed amount to the buyer or withhold a certain amount (as retention) for any works the surveyor has identified as affecting the value of the property.  I have a personal dislike for these types of surveys because in my opinion surveyors are far too cautious in what they report. They often recommend timber and damp surveys and electrical inspections as standard without any real grounds for doing so, and often inaccurately report other issues. This is hardly surprising given the very brief inspection undertaken, however this cautious approach is more likely to be a result of the litigious World we now live in, where Surveyors provide ‘their own safety net’, and therefore try to reduce the risk of being sued.  To a certain extent this is understandable, but this should never be at the expense of accurate reporting.

I have recently bought and sold a property.  The Valuation Surveyor for the lender of the prospective purchaser of my former house reported damp problems and an issue with the chimney.  A timber and damp survey was recommended (by the surveyor) with a £1000 retention sum for repairs to the chimney.  The prospective purchaser tried to use this to negotiate a reduction on the asking price, however as a Chartered Building Surveyor I knew that this was completely inaccurate and unnecessary.  I tried to challenge this, however as it was not my lender (it was the purchasers of my house), I continually hit a brick wall.  My purchaser became unnecessarily nervous about buying a house which they now thought was riddled with damp and with a chimney that was about to collapse! In the end, and to ensure that we did not lose the sale, through gritted teeth, I agreed to a £500 reduction, even though this was completely unnecessary.  I am sure that many reading this will have similar experiences, which I am also sure is one of the reasons why some property transactions fall through at the last minute, which is extremely frustrating.

This demonstrates that lenders rely on the advice of surveyors who carry out such a brief inspection that it is almost laughable, who then recommend further inspections and remedial works that are often not necessary.  Remember, a mortgage lender’s valuation is for the lender only and should not be relied upon by a purchaser (mainly for the reasons stated above), as a means of accurately assessing the condition of a property.  A much more comprehensive inspection is therefore required and I would recommend that a Building Surveyor is instructed to undertake a full, comprehensive survey of a property prior to contracts being exchanged.  Although this will have a cost attached to it, you will often find that a building survey will prove to be extremely cost effective as it will highlight possible defects/issues which can either be used to negotiate the sale price, or possibly allow the buyer the choice of pulling out of the sale, before contracts are exchanged. This is something I will discuss in next week’s article.

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‘Greening Buildings’ – Achieving emissions reduction targets will be impossible without significant up-skilling

Guest Article from Professor George Martin, Low Impact Building Centre, Coventry University

Smaller firms are reluctant to make any investment in new approaches and up skilling when budgets are tight; large contracts remain out of reach, and potential partners are put off by their lack of green technology know-how

Source: http://www.trainingzone.co.uk/

The urgent task of 'greening' the world's buildings is going to mean big business for those firms with the right skills and knowledge. This does not just mean builders but the whole supply chain: plumbers, electricians, architects, building product designers, product manufacturers, lawyers, agents, building services engineers, facilities managers and of course clients and the users of the buildings.

A combination of tough targets and legislation at government level along with rising energy prices makes low impact building inevitable, and a long-term source of growth for firms. For example, the UK has a target of reducing its carbon emissions by 34% by 2020 from a 1990 base.  Fast forward another 30 years and the requirement is to reduce carbon emissions by 80% from that 1990 base. From 2016 all new housing needs to achieve the latest definition of what is ambitiously know as 'zero carbon, and from 2018 the Energy Act makes it unlawful for landlords to lease residential or commercial buildings with an Energy Performance Certificate rating of an F or G - and that's a lot of leaky old houses, flats, offices and factories that will need upgrading. Take a look at the short video below to see Coventry University's Low Impact Building Grand Challenge Initiative: 

The Global Green Building Trends Report in 2012 confirmed this picture. It's not just seen as the 'right thing to do' or a niche market. Clients increasingly want it, and construction firms can see the benefits from lower operating costs and improved reputation. 63% of firms surveyed internationally have green work planned in new commercial projects and 45% in new institutional projects by 2015; 50% have plans for green renovation work. The market for low carbon building technologies in our region alone (in the West Midlands) is estimated to be £1.7bn.

With the on-going recession in construction you'd expect firms of all sizes to be chasing the new opportunities. Instead smaller firms are reluctant to make any investment in new approaches and up skilling when budgets are tight; large contracts remain out of reach, and potential partners are put off by their lack of green technology know-how. But the opportunities remain huge for those firms willing to commit themselves to the low impact buildings market. More specifically these will be in addressing the need for retrofitting existing properties with energy efficient technologies; supplying new technologies to new building developments to improve their efficiency standards, monitoring on building performance when occupied, and then acting on those reports.

Small and Medium Enterprises (SMEs) aren't in a position to even bid for the largest contracts from the public sector or overseas, but they can make themselves an important part of the supply chain and partners to the large firms. Essentially they will achieve this by increasing their knowledge and ability to use the technologies becoming available, developing niche areas of expertise in sustainability and by up skilling their staff. Smaller businesses will also need to be open-minded and flexible when it comes to identifying and participating in opportunities for collaboration, contributing to open innovation and even sharing opportunities with competitors in order to develop their profile in the eyes of the industry giants.

Coventry University's brand new Engineering and Computer Building

To make this happen firms need to get advice and support to make the change. For example, in the West Midlands - where construction and related firms have seen the biggest decline - Coventry University is running the Sustainable Building Futures (SBF) Project for small to medium sized businesses to help them make themselves competitive for the future (until June 2015). Co-financing from the University and the European Regional Development Fund (ERDF) means the help is all provided free for eligible organisations. There are the general knowledge-building training workshops and seminars on what the opportunities are, for example, new technologies and services that are now available and also specific up-skilling in subjects as Passivhaus, Lean and Building Information Modelling (BIM).  The European Regional Development fund (ERDF) have also provided funding for a state of the art Environmental Chamber, housed within the University’s brand new Engineering and Computer Building, where products can be tested.  One specific initiative involves the up-skilling of window manufacturers in the West Midlands in how they can learn how to produce high performance windows and then to test prototypes in the Environmental Chamber.

The recession hasn't helped the construction industry in its transition to low cost and low carbon buildings that perform in use. But now, low impact building offers the clearest and strongest way forward, in lower costs, new sources of business and jobs, and it will be the forward-looking businesses that are already up skilling who'll secure their place in the new supply chains.

Professor George Martin, Low Impact Building Centre, Coventry University 

http://www.coventry.ac.uk/business/supporting-your-business/sustainable-building-futures/

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Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.

Non-Traditional Housing - External Wall Insulation

Guest article from Joe Malone BSc(Hons) ICIOB Head of Asset Management ALMO Business Centre Leeds

It should be recognised that the majority of External Wall Insulation (EWI) systems are non-structural and therefore are fixed to load bearing fabric. There are times when a non-structural system is inappropriate for use such as in Crosswall construction.

The Triple Problem

Figure 1. Typical EWI System - Source: http://www.everwarmgroup.com

Non-traditional stock normally presents 3 major problems for registered providers, they are thermally inefficient, they may have structural defects and they are unattractive and often blight housing estates. Whilst each problem presents unique challenges, none are insurmountable and life cycles can be cost effectively extended for a further 30-40 years so long as investment decisions are evidence based and address the three problem areas under discussion.

Poor SAP Ratings

Since all non-traditionally constructed properties require an improvement in their SAP rating it makes sense to discuss external wall insulation. There are a number of EWI systems in use but unless you are looking or a structural system then there is little variation apart from the choice of insulation material.  Phenolic boards (PF), PUR (Rigid polyurethane foam), PIR (Polyisocyanurate) EPS (Enhanced polystyrene board) or mineral wool are all frequently used as part of these EWI systems.  Rigid phenolic insulation products offer best thermal performance when, compared with rigid polyurethane or extruded polystyrene. Its low thermal conductivity allows specified thermal performance targets to be achieved with minimal thickness of insulation. This is particularly significant where space saving is important. For this reason it is one of the most widely used products in the external wall insulation business. That being said Phenolic board comes with a few known and a few less well publicised issues:

1.   Demand for phenolic board has exceeded supply which has caused manufacturers to cut the 12 week curing period to 6 weeks in an attempt to keep the market supplied. There are some concerns with regard to the effect this decision will have on the quality of the product and there is some early anecdotal evidence regarding increased board shrinkage after system application. Phenolic boards were known to shrink which can occasionally cause gaps to open up in the building envelope. Will we now see an increase in the severity of this problem? Many commentators (myself included) believe that we will.

2.   Phenolic board has known acidic properties and should not be placed in direct contact with metal roof decks, wall cladding or stanchions. There are cases pending against the manufacturer where phenolic boards have caused corrosion of steel roof decks.

3.   Phenolic foam insulation has a significant environmental impact, exceeding that of other insulation materials. Significant amounts of petroleum and natural gas must be burnt during the manufacturing and refining processes, though the insulation industry has ceased to use chlorofluorocarbons (CFCs) in the manufacture of foam insulation products. In simple terms, it's nasty stuff, its manufacture was discontinued in the US in 1992 and you should consider whether continued use of phenolic board is a responsible business decision for you or your client.

4.     Phenolic foam insulation will deteriorate if it is exposed to moisture or sunlight for extended periods of time. While it will be safe from sunlight exposure inside your walls or between your floorboards, it is important to store phenolic boards correctly and apply render to walls within 48hr of fixing external wall boards.I have personally managed millions of pounds worth of EWI work and site management of this issue has been a consistent and ongoing problem.

Figure 2. A Wallsall scheme. No design work and bland results

PUR board comes with similar known environmental problems but is also known to suffer a loss of U value (thermal performance) with time. This is due to a combination of air infiltration and fluorocarbon gases diffusing out of the product (outgassing) over time. This rate of outgassing is unclear and varies from product to product but in all likelihood a property that has a PUR insulation system installed will have a significantly reduced U Value 10 years on from the date of installation.

The most cost effective and pragmatic choice of material from the 3 materials listed is EPS, in particular Graphite enhanced polystyrene (GEPS), which will give a significantly improved U-value over standard EPS. Long term performance gives significantly less concern than phenolic or PUR and whilst it could never be considered a ‘green’ product, it is in my opinion the more environmentally friendly and acceptable choice from the main types of rigid insulation board in main use. Mineral wool also provides a viable alternative choice to GEPS yet it one of the more underused options. Of course there are pro's and con's with every material choice and whilst I would recommend GEPS for low rise stock, consideration needs giving to fire performance when used in high rise stock.

Fire Safety Performance

A chemical called HBCD is often added to EPS or GEPS to improve fire performance and whilst you may not yet have heard about health concerns relating to the use of HBCD, it is on the verge of being banned or having its use restricted in Europe. In general terms EPS or GEPS has poor fire performance but can achieve a class E rating when enclosed with a laminated facing layer of the type seen in EWI systems. That being said, Class E isn't really acceptable for high rise applications and you would be looking to build in external fire breaks if such a system was used externally on high rise blocks. Whilst being the least environmentally friendly, PIR or PF insulation boards offer the best fire resistance having achieved a class O rating; this does raise their profile for use in high rise applications.

EWI System Failures

There are a number of EWI high rise system failures in Scotland and Birmingham and the North West; I'm sure there are many more that to date I am unaware of but the point is made. One spectacular failure in the North West was captured by a passerby on their mobile phone:

In Scotland court cases are pending but in Birmingham the issue has been turned into a dispute over whether the products or the standard of installation were the cause of these failures What is clear is that insulation boards have moved or become partially detached from the external building façade and the I have some concerns that systems have not been adequately wind tested for installation at height. Another known problem is that mechanical fixings into no fines concrete have been very poor or completely inappropriate for the circumstances. There have been a significant number of hammer fixing failures into concrete and particularly no fines concrete.

In general terms, the majority of EWI system installers are satisfied with mechanical hammer fixings alone whilst a minority of installers believes this is a problem and adopt a belt and braces approach to installation by both gluing and mechanically fixing boards to the external façade. I agree with this approach for low rise stock but would still issue a note of caution with regard to specifying a standard non-structural system for medium to high rise stock.  If the thermal solution is not given adequate consideration and fails then I have experienced first hand how extremely difficult it is to get contractors to resolve these failures when high rise access alone (mast climbers or scaffolding) can cost them somewhere in the region of £100k to £250k per block.

EWI Structural Systems v Non-Structural Systems

It should be recognised that the majority EWI systems are non-structural and therefore are fixed to load bearing fabric. There are times when a non-structural system is inappropriate for use such as in Crosswall construction. Crosswall construction takes all the building loads from floors, roof etc. on the gable walls. The front and rear facades of these properties are non-load bearing and therefore unsuitable for fixing a standard EWI system. In these cases you would choose a structural EWI system such as Structherm. Moreover, a structural EWI system has several other potential applications when considered for use on non-traditional stock.

·       Full cladding of defective buildings (reduces need for difficult remedial work)

·       Fully designed structural cladding for non-traditional medium to high rise structures. Designed to account for wind loadings etc.

·       Full over-cladding of defective or inefficient system built structures (improving structural safety and thermal continuity)

·       Enclosing balconies and walkways (converting external space into usable internal floor area)

·       Forming new or extending existing parapets (improving safety at roof level)

You should also note the failures of mechanical fixings into concrete (particularly no fines) and ensure a system is designed to bypass this issue. This is a note of warning that should apply to all system design but you should note that bad site management during any installation process will negate any effective design process. I have visited site on many occasions and seen the wrong size hammer fixings used or more commonly, operatives not using depth stops attached to their drills and often even punching straight through walls when drilling for hammer fixings. The length of hammer fixing is critical to the design process yet I am convinced that they often don't account for the depth of existing render applied to some non-traditional properties and therefore hammer fixings can be fixed to insufficient depth in the structural panel. It is all too easy to make assumptions about the depth of existing render and I often insist on having patches chiselled out to expose the substrate. This allows us to make a more informed decision about the required length for hammer fixings.

Pre-Existing Concrete Defects

In part one I discussed the defects relating to carbonation and chloride attack of concrete non-trads. The problem is of particular concern when dealing with high rise stock because the repair of cracks and spalling can significantly add to your refurbishment cost. Each small localised repair can cost circa £30-40 per repair. There can be hundreds of such repairs on each high rise and this doesn't account for access costs or the cost of an anti carbonation coating. Rusting is of course an expansive reaction and treating rusted rebar is a key part of the concrete repair process to prevent future spalling of the concrete. There is an argument that says overcladding with an EWI system cuts off oxygen required for the rusting process and therefore prevents any further deterioration of the rebar. This could to a degree mitigate the requirement for concrete repairs but where structural engineers are involved in the design process then they are less likely to accept this argument.

Is EWI Appropriate for All Properties?

In short, No! There are concerns about the potential for EWI systems to cause damp and this stems from two issues:

1.     Traditional properties built on the ‘overcoat’ principle and using traditional stone or lime mortars are meant to breathe. Adding EWI would affect the walls breathability and is completely inappropriate for use on these properties. An ex-colleague of mine has been trying to find a solution for improving SAP on single skin stone properties in Cumbria, they went with an internal wall insulation system and whilst pragmatically this raises less concern it will still affect the walls breathability.

2.     I’ve seen a number of EWI systems badly installed and bridging the dpc. The installers may well claim that their materials will not wick moisture but you’d be wise to discount their claims. 

Design

Figure 3. A well designed Nottingham City Homes scheme in Bulwell, Nottingham.

Well designed EWI systems have the ability to completely transform our estates but if design is not given adequate consideration then completed estates will remain as bland or even be damaged, particularly by the choice of gaudy colour schemes. Housing providers who give residents too much choice in the design of their estates are often those that end up with a series of ill matched pink, green and violet housing.

Whilst colour choice of external render systems is one consideration, all EWI systems offer a choice of features that will add architectural detailing, particularly effective can be the use of bricks slips. On the last scheme I was involved with we gave a great deal of consideration to all aspects of design, even to the extent of having artists illustrations done so we could make informed choices on design. To many organisations, EWI is nothing more than a technical solution to deal with thermal efficiency but they are failing to protect the future of their estates and communities by not giving adequate consideration to the design process.

Please feel free to share this article and other articles on this site with friends, family and colleagues who you think would be interested

Information/opinions posted on this site are the personal views of the author and should not be relied upon by any person or any third party without first seeking further professional advice. Also, please scroll down and read the copyright notice at the end of the blog.