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That was the headline of a news article published by the Scottish Tabloid Newspaper, The Daily Record.
The article outlined the plight of Lorraine Gallagher and husband John who were shocked to find out that a surveyor had valued their Precast Reinforced Concrete home as being worthless.
The Caldercruix property near Airdrie, had been loved and well maintained since the young couple first moved in back in 2002, when it was valued at £42,000. The house soon became a family home as Lorraine and John welcomed their two children Erin & Ross into the world.
Whilst living in thei family home, the couple were not aware of any issues with their property and certainly nothing that could wipe away the entire value of their home at the sweep of a surveyors pen.
Lorraine, a systems and data officer, explained to The Daily record how in 2002, they had put an offer in on the house. They instructed a surveyor, who valued the property at £42,000 and deemed it suitable security for a mortgage with HSBC. After further consideration, the couple decided to sign up with Clydesdale Bank instead, who were happy to accept the HSBC surveyors report..
It January of 2017, the couple decided to remortgage and Clydesdale Bank sent out a surveyor to inspect the property. This is when Clydesdale delivered the huge blow to the family, when it informed them that their house had officially been classified as defective by the Government, and as a result, it was now considered to be, worthless .
Lorraine told The Daily Record:
“When the bank told me the news. I was stunned, upset and angry.”
It transpires that the Post-War Whitson-Fairhurst House is just one of a number of PRC property types, classified as defective by the Government in 1984. This was due to the property suffering from a high risk of structural corrosion caused by chemical reactions between the concrete and steel which could also affect reinforcement rods inside concrete panels of the house. Similar issues were also found in a number of other system built, precast reinforced properties.
Under Scotland's 1987 Housing Act and separate Acts affecting England a Wales, a scheme was set up to provide grants to repair these costly and potentially serious issues, but the scheme ended in 1994. No other grants or funding for repairs has been made available since then. This has left the couple and owners of similar designated properties, with potentially huge repair bills, to make these properties safe and ultimately, mortgageable.
The main issue here, is that all designated properties listed under the act, in England, Scotland & Wales are considered unmortgageable and unsuitable security for lending purposes, unless subjected to approved repair. Had the couple been informed of the properties designation in 2002 when the HSBC survey was conducted, they may have decided to walk away from the purchase or at the very least, gained access to the government funded repair scheme. One could also question why a qualified surveyor was unable to identify the property correctly as a Whitson-Fairhurst PRC constructed house considered defective under the legislation.
Sadly, the Gallagher family now face an uncertain future regarding their home and it's value. One option, would be to sell the house to a cash buyer, but due to the defective status, they would be unlikely to get a realistic return on their investment.
But, there may be a change of fortune on the horizon!
From the 30th of July 2018 the Scottish Government has repealed the defective designation legislation, under section 99 of the Housing (Scotland) Act 2014.
This effectively removes a piece of legislation that has blighted a huge number of properties in Scotland since 1984.
This could be good news for the Gallagher's and thousands of other families in a similar situation, but there are some caveats to this welcomed change in legislation.
The first being that the repeal by the Scottish Government and only affects properties in Scotland. The relevant acts covering England & Wales still stand.
Secondly, the Scottish Government can do nothing to force lenders to accept this change or alter their current lending criteria to provide mortgages for any property which was previously classified as defective.
So unfortunately, unless England and Wales also repeal the defective property legislation, we are unlikely to see any real change in market attitudes toward these properties. We believe that each property irrelevant of designation status, should be viewed and surveyed on a case by case basis, Only a full structural survey can determine if a property is indeed defective, opposed to a widesweeping generalisation that all properties of a specific build type are defective, due to the findings found in a limited number of surveys.
The BRE (Building Research Establishment) have proven from their own surveys, that not all designated properties necessarily contain defects. A number of factors including weather exposure, water ingress and poor maintenance were all found to be contributing factors likely to influence the risk of such defects from occuring.
Stigma, no doubt also play a part in this situation, as the term 'defective' alone, naturally raises concern, but unless England and Wales also follow Scotland's lead and repeal this Act, then this stigma will likely increase as Scotland's repeal will be viewed as worthless for at least as long as England & Wales still brand these properties as defective
It should also be borne in mind, that the designation was never intended to render these properties unmortgageable. The original legislation was introduced to provide assistance to homeowners affected by structural flaws found within certain named systems listed under the designation. (see below)
Section 99 of the Housing (Scotland) Act 1987, lists twelve types of precast reinforced concrete (PRC) construction houses and designated them as defective.
Ayrshire County Council (Lindsay)
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