Zero valuation

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I am buying a leasehold flat in London. Decent lease, low rise, not over four storeys, no cladding.

The bank’s valuation has come back as zero. The reason being they say is internal cracks indicating past subsidence/landslip/heave. The report then says it’s historic and is of no further risk.

We have cancelled our booked survey, as no point if bank won’t lend us money.

Is this valuation report mistake? If it’s no further risk, why value it at zero? Wouldn’t the buildings insurance be an issue if there’s a problem? Offer was accepted at 240k and is in theory good value. Other flats on the same estate sold recently. Would a different lender help? We are absolutely gutted.

Lenders generally take a cautious approach and their valuation surveys aren’t sufficient to determine whether a structural issue is of major concern or not - they’ll usually simply decline to lend. You could try an alternative lender, but many highstreet lenders use the same surveyors in whichever area the property is located, so there’s every likelihood it would simply flag up as already surveyed.

You could challenge it with a full RICS surveyor’s opinion - and indeed, even if you choose to not go ahead with your own, the vendor may wish to have a full structural survey carried out themselves and either have the problem put right if required or use the results to refute lenders’ assessments, as they’re going to face the same problem with any buyer.

I know of a block of flats that is only cash buyers as they are not mortgageable and a street in another town the banks won't lend on due to historic flooding.
Both the flats and houses seem to sell to cash buyers easily enough.
I don't think that it's that uncommon.

Someone more knowledgeable will come along soon I'm sure.

Good luck

Yes, I see. But I can’t see how the leaseholder can fix this. It’s down to the freeholder who I assume had the subsidence issues fixed - hence historic.

If historic subsidence has been previously identified and the freeholder has had it put right, your vendor should know about that - they’ll have been provided with documentation about the works themselves either in their leaseholders pack when they bought or from when the work was carried out if they owned the flat at the time, and can provide that to you (or request it from the freeholder) so you can try to challenge your lender’s valuation. Have you conveyed the results of your valuation to them and asked if they were aware, or asked them to contact the freeholder?

If your vendor wasn’t aware and were to now commission a survey which identifies active subsidence, they have a contractual right (via their lease) to have their freeholder put the issue right. If the survey identifies historical subsidence which has been put right, they can request the documentation on that to show buyers.

A friend had a similar situation with Japanese knotweed: a mortgage valuation identified that there was historical growth which did not appear to pose an issue - but without any evidence that the knotweed had ever been properly treated, the lender returned a zero valuation. Once she was able to provide evidence of the treatment plan and survey post-treatment, the lender was amenable to lending.

"Offer was accepted at 240k and is in theory good value."

Well you know now why it was so cheap. Probably best to be happy that the bank has done the survey work for you rather than you having to pay £K to find out.

No, it’s not that. The next door flats have both sold recently. This flat is cheap because it hasn’t been decorated or had anything done to it in over 20 years. It’s had new windows and doors put in by the freeholder last year.

Thank you. That’s useful. Vendor bought direct from the council 25 years ago. Vendor is appalled. He’d heard from his solicitor that the mortgage had been declined and assumed it was something to do with our finances.

Have you spoken to the neighbours who bought recently, either to find out if they had the same problems with mortgaging or, if they didn’t, who their lender is? It’s worth a shot.

On the chance that there isn’t one local surveyor used by a number of lenders, it may be worth trying a different lender. Anecdotally, I used to own a first floor maisonette, one of two in the building. Both ground floor and I had mortgage valuations (different lenders) carried out around the same time. Mine came back fine; downstairs’ came back indicating possible subsidence. Downstairs argued the point about this entirely bizarre contradiction, but eventually just went with the same lender I had, who were fine. Neither of us had any issues raised when we each sold a few years later.