Discovering that the property you’re looking to buy is on contaminated land can be extremely worrying. For many buyers, it can put them off purchasing the property. However, even if a property is flagged as being possibly built on contaminated land, it doesn't necessarily mean this is true.
If contaminated land has been flagged on your environmental report when buying your house, you'll naturally be worried about risks to the health of you and your family. But what does it mean for your property purchase, and can you get a mortgage with contaminated land? Contaminated land can pose significant challenges when it comes to mortgages. This article will explore the challenges with these types of properties and how you can get a contaminated land mortgage.
The Topics Covered in this Article Are Listed Below:
- What Is Contaminated Land?
- Can I Get a Mortgage with Contaminated Land?
- How Can I Find Out if Land Is Contaminated?
- What Should I Do If My Property Is on Contaminated Land?
- How Can I Get a Mortgage on Contaminated Land?
- Can I Get a Mortgage on Contaminated Land Without a Property on It?
- A Mortgage with Contaminated Land: the Bottom Line
What Is Contaminated Land?
Contaminated land describes an area that may be polluted by one or more of the following:
- Tars
- Oils
- Chemical substances
- Asbestos
- Gases
- Heavy metals
- Radioactive substances
These materials could be seriously harmful to people, wildlife, and the safety of buildings. They can also pollute groundwaters, rivers and lakes. It's common for contaminated land to have been previously used as a refinery, mine, steel mill, landfill, or factory.
Can I Get a Mortgage with Contaminated Land?
Securing a contaminated land mortgage, especially a competitive mortgage, can be a significant challenge. It largely depends on what the contamination is, the expected cost of corrective action, and the likelihood that the lender will be able to sell the property or land in the future if they repossess it. Lenders will want to conduct a risk assessment to determine whether making a mortgage offer, considering these factors, is viable.
Most lenders will not offer you a mortgage if there's a significantly high risk that the property will have poor resale value. However, if it's considered that the contamination risk is fairly low, you may find it possible to get a contaminated land mortgage. That's why it's a good idea to get advice from an independent mortgage broker. They’re experts in this area and will be able to identify the right lender and mortgage product for your exact needs and circumstances.
How Can I Find Out if Land Is Contaminated?
Before purchasing a property, it's generally worthwhile to conduct an environmental search. This will provide an overview of the condition of the property and any issues or risks that may crop up in the future. Environmental searches will report on:
- Contaminated land
- Flooding
- Ground stability
- The presence of radon, a radioactive gas
The report may not document any risks. However, if it does flag something, you should investigate further or contact your local council to find out more information about the land.
What Should I Do if My Property is on Contaminated Land?
You can take remedial measures if you learn that your property is built on contaminated land and could be hazardous to you, the environment, and your property. According to the Environmental Protection Act 1990, the responsibility for cleaning up contaminated land falls to the person responsible for causing the contamination.
However, it isn't always possible to identify the person, persons, or companies that may be responsible, especially as some contamination may have occurred some years previously. Unfortunately, the land's current owner is responsible for decontaminating it in this case.
How Can I Get a Mortgage on Contaminated Land?
Getting a mortgage for land that may be contaminated is possible and there are a few options open to you.
Building's Warranty Certificate
You will need to get a copy of the property's warranty certification or National House Building Council (NHBC) certification from the sellers. If this certification is dated later than 1/4/1999, it should provide insurance cover for the contaminated land, including the cost of the land to be either managed or cleaned. However, this may not be the case, so you must check the policy information to ensure it includes contaminated land cover.
Residential Contaminated Land Indemnity Insurance
Getting Residential Contaminated Land Legal Indemnity Insurance will ensure you’re protected against any potential losses incurred if you must comply with a remediation notice. As costs for such policies can vary, you may find it cheaper to ask your local council to check their records for contaminated land first. Some councils will charge you for this service, but some will check their records for free.
Specialist Lenders
Look for a mortgage lender that has flexible criteria regarding contaminated land. There are also specialist lenders who will consider contaminated land mortgages. However, both will require you to have a remediation plan in place.
Can I Get a Mortgage on Contaminated Land Without a Property on It?
Some lenders will automatically turn down applications for contaminated plot mortgages and consider them unmortgageable. If you struggle to get a mortgage for a piece of contaminated land, you may wish to consider alternatives such as a bridging loan or development finance. These would finance the purchase of the site and cover the costs of the remediation work.
Once completed, you can then look into applying for a standard land mortgage based on the land's value after remediation. If you intend to develop on the land, you may consider taking out development finance to fund the site acquisition, remedial work, and building. An independent mortgage adviser will be able to advise you on the best course of action for your circumstances.
A Mortgage with Contaminated Land: the Bottom Line
If you've come across your dream property only to discover it's been built on contaminated land or suspected contaminated land, all is not lost. Our team of independent advisers at John Charcol will be able to advise you on the options available and help you find the right contaminated land mortgage for your needs. Get in touch with us today on 0330 433 2927 or submit an online enquiry.