Purchasing a house with illegal annex

[BananaMoon4]

I have posted another thread about a house we offered to purchase. The house was at least 100k more than other houses in the street. We decided to go for it as the annex would be a great asset to us.

Now after paying for solicitors, survey, valuation and mortgage fees, it transpires from searches and survey that the annex is actually a garage that has been converted illegally. Vendors and agents saying 'its fine, we will put an indemnity policy in place and the council can't do anything about it as it's over 10 years old'

Maybe the council can't make us pull it down, but it clearly wasn't built to any building regulations and we purchased on the basis that it was a separate dwelling for my mum to live in.

The valuation came back that we had paid a little too much IF the annex was legal. If it was not, which it isn't, we were told the value of the house is 'significantly less' and this has been flagged by our mortgage company

I offered to continue to pay the price we offered if the vendors obtained a lawful change of use certificate, and had a builder / electrician / plumber bring the annex to modern regs making it safe and habitable, as we were sold.

The vendors are refusing to do this.

I asked to renegotiate the price as we would not have offered what we did if we knew it was an illegal garage conversion and not an annex (it is completely separate to the house) they offered us a 1% reduction on the price (10k). If we had to rebuild the annex as it was unsafe or uninhabitable, it would cost us upwards of 100k - which is what we were over paying for in the first place.

We are going to proceed with the sale of our house and go into rented to prevent the chain of 5 beneath us collapsing because of this. Also with the market a bit unstable ahead of the budget we might just wait and see what happens.

Is this one to be walking away from? Is there any recourse on the 5k we have already spent as we agreed a price based on a habitable annex? Our solicitor said there wasn't as we haven't exchanged.

Are they obliged to be truthful to buyers? Both ourselves or future buyers? To prevent another family being disappointed and out of pocket? As surely it will continue to flag until they fix it!

So deflated with the whole process!

The vendors are refusing to do this.

Totally worth walking away from!

Sounds like the only thing you can do is walk away. If they're refusing to get it up to scratch then you know it's going to be a massive headache.

Walk away.

It would make me question what else they are not disclosing. I would walk away.

If they think an illegal garage conversion is a good idea then who knows what else they've done. It's best to get out while you can.

No such thing as an illegal annex in planning, if it’s been there 10 years it’s almost certainly lawful. Is there something wrong with its construction that makes you think it’s dangerous? If it’s been converted 10 years with no structural problems then it’s probably ok but get a surveyor to check it if you’re worried. Unless there’s a structural problem why on earth would you need to rebuild it from scratch?

I’m not surprised they’ve refused your requests, it may not be up to current electrical or plumbing regs because it’s 10 years old, is there any reason you think it wasn’t up to regs when it was built?

it’s a bit unfair that they didn’t let you know that it didn’t have planning permission but lots of people do things not realising it needs permission but also annex’s can be a grey area as to whether permission is required or not, sometimes it can depend on the Council

I'd just hold off and see what happens. You're moving into rented so will have a bit of time on your hands. Reality might bite with the vendors and you may be able to snap the property up in the near future for a much lower price that enables you to do any work necessary to the annexe. If that doesn't happen, another house will come along soon.

Idemnity policy will do nothing to protect you or resolve any underlying problems.

I would definitely walk away...

Is it illegal? Are you sure.
Not everything built does require PP. Garages can be a bit of a grey area if nothings extended.
I wouldn’t necessarily walk away from the whole thing because of this, if the house & location otherwise works for you. They could get the necessary sign off etc or lower the price.

Walk away.

The people with illegal bits are also the people who will get a handyman to polyfilla the bit that shows the entire bathroom wall is crumbling, or stick a carpet over some rotten floorboards, or a duvet in the attic to absorb drips from the leaky roof, or forget to mention that the wiring hasn't been redone in 70 years and that the wallpaper they put in the kitchen covers up thick cracks from the subsidence because the kitchen extension never had proper foundations laid down oh yeah and it floods when it rains....

Is it insurable? I’d need to check that, then if it was dream home I’d offer 75k less, see if they accept, if they don’t then wait it out

Thank you everyone. They seem to have all their ducks in a row in every other respect, so I find it strange why they wouldn't have done the conversion properly and legally in the first place.

There is planning in place and approved to build a double garage only.

Furthermore, they aren't paying any council tax on the annex and it has a kitchen, bathroom and boiler. It's a full set up, and 'looks' like it would have been expensive to build, so why not just do it properly and have it signed off. It wouldn't have fallen within permitted development.

Or, why not put it right now and get it signed off prior to selling. It feels odd and unsettling...

if the mortgage company have down-valued it then vendors don’t stand a chance of getting the original price. What dickheads. Hold firm & offer the knocked down real value.

Good point re insurance! I didn't think of that.

I was going to offer to pay exactly 75k less, that was the figure in my head. They won't take it. But I also know they won't sell either at the price they want - its been on the market for almost 2 years with now potentially 2 failed purchases!

The Annex would be reassessed for the purposes of council tax if it has a separate entrance to the main dwelling.
Have you checked that they did not do a planning application that was rejected hence the works being completed without building regs sign off. You can search on the local authority portal if it has not already been flagged on your search results.

With regards to indemnity insurance it would protect you from the council asking you to remove the works to the original state but not for any issues with the works as other posters have mentioned. However if you were to seek retrospective consent your indemnity would be invalid. If and when you sell you’ll also need to provide an indemnity as the value of the property will have increased.

To answer your original question there is no way to claw back your 5k unfortunately as the conveyancing process is buyer beware. In the grand scheme of things 5k loss is better than what you could potentially lose. As you may struggle with remortgaging in the future if your lender is already unsure about the works and the value to the property.

All the best.

Surely you don’t have a choice unless you’re sitting on a ton of cash, the lender has down valued it, so they won’t give you or anyone else a mortgage for that much. So they’ve got no chance of selling that that price anyway.
what is the bank saying it’s worth now? Offer that if you really want the house, they won’t get much better so they can decide then. But check you can insure an illegally built dwelling too.

you say it’s had another failed purchase, did that get as far as the survey? Did you ever ask about the outbuilding? I think if you have in writing you asking about it and they or the estate agents lying then you may have recourse for the money you’ve spent.

Thank you, this is really great advice.

It has a seperate entrance, it is completely detached from the main house and located in the garden. I wonder if they don't want to declare it incase they get a council tax bill!

Checked and never a planning application for an annex, just a detached double garage.

Definitely a very good point about remortgaging in the future. Our broker had to shop around for a mortgage in the first place as some lenders, including our current one, wouldn't lend on an annex.

Despite loving the house, it just seems we could be setting ourselves up for a nightmare.

The bank wouldn't give me an exact figure but stated the price offered is at the very upper end of valuation if the annex has lawful use and building regs. Without the annex being done properly and essentially a double garage, the house would be worth significantly less. They advised to proceed with caution.

The agent told me, in writing, the previous sale fell through because the purchaser decided to buy a cheaper house, after I had queried again the reason for relisting. This was after them verbally telling me their mortgage fell through.

The property advert states 'a highlight of the property is a detached one bedroom annex that would make an ideal seperate living accomodation, office or gym'

I'd walk away and also report them to the council for fraud regarding failure to pay council tax.

As @CinnamonCinnabar suggests I'd also walk away and report them to the council for fraud regarding failure to pay council tax. They have caused you to lose 5k and there is no chance of getting that back. A bit of compensation to throw them under the bus.

Sounds like they and the EA have been economical with the truth.

No such thing as an illegal annex in planning, if it’s been there 10 years it’s almost certainly lawful.
This is total crap, hope you’re not a solicitor. Of course you can’t just build another separate dwelling on your plot of land without getting permission from the council. There are case after case after case of sadfaces in the newspapers from people who just made another dwelling in their garden and got ordered to tear them down as they are illegal. Did you advise them too? I sense a class action against you one day if so.
OP I’d walk away ASAP, and if yours is the thread I remember about the other cheaper property on the same road, why didn’t you take the good advice to buy that property instead? Was there something wrong with the other one?

Is it sold as an annex? If planning was for double garage then that’s what it should be priced at. It’s a garage they gave converted but you could convert back to a garage. It’s not an official annex and that is what paperwork and price need to reflect. Is your solicitor not saying this?

Walk away. Depending on where it is (conservation area for example) it is probably unlikely that the council would make you take it down, but what you’ve asked is totally reasonable. They should get it sorted and make it legally habitable and the fact that they’ve refused speaks volumes.
And for future reference, you can see exactly what planning has been granted for any property, for free, on the relevant local authority planning portal.

What does your surveyor say about the annex? Have they found building or other problems?

You're thinking of cases where the council takes action quickly. Depending on the nature of the work involved, and when it was completed, work done in breach of planning control can become immune from enforcement action basically after 4 or 10 years, provided that no enforcement action was commenced before the immunity time period expired. Someone, ideally the sellers, would have to apply for a Certificate of Lawfulness, and would have to provide evidence to show the development has been there for the relevant period, e.g. dated photographs, invoices, utility bills etc.