My House Sale Fell Through Because of Spray Foam Insulation – Can I Claim Compensation?

Understanding Your Options When a House Sale Falls Through Because of Spray Foam Insulation

For many homeowners, discovering that spray foam insulation has become an issue only happens when they decide to sell their property.

The estate agent finds a buyer. A price is agreed. Solicitors are instructed. Everything appears to be progressing normally until the buyer’s mortgage lender receives the valuation report.

The surveyor identifies spray foam insulation in the roof space and raises concerns. The lender asks for further investigations, requires specialist reports or simply decides not to lend. The buyer is unable to proceed, the sale falls through, and the seller is left wondering what to do next.

Unfortunately, this is becoming an increasingly common scenario.

If your house sale has fallen through because of spray foam insulation, you may understandably feel frustrated. You may have already spent money on estate agency fees, legal costs or surveys. You may have lost the property you intended to buy. In some cases, you may even have to reduce the asking price or pay to remove the spray foam insulation before another buyer can proceed.

The important question is whether those losses could have been avoided and, if not, whether someone else may be legally responsible.

This guide explains why spray foam insulation can affect a house sale, why mortgage lenders sometimes refuse to lend, when there may be grounds for a legal claim and the funding options that may be available. It also explains the practical steps homeowners should take before paying for removal or accepting financial losses.

If you’re looking for general information about defective spray foam insulation and when installation problems may give rise to a legal claim, you may also find our guide ‘Spray Foam Insulation Claims: When Poor Installation Causes Problems with Your Home’ helpful.

What You’ll Learn in This Guide

• Why spray foam insulation can prevent a house sale
• Why mortgage lenders sometimes refuse to lend
• Whether you need to remove the insulation
• When you may have a legal claim
• Whether you can claim against the installer or finance company
• What compensation may be available
• What evidence you should keep

Why Has Spray Foam Insulation Become an Issue?

Spray foam insulation is not automatically defective.

Many homes throughout England and Wales have spray foam insulation installed and there is now an industry-recognised inspection protocol intended to help surveyors assess each property individually rather than treating every property with spray foam in the same way.

However, concerns remain within the mortgage industry.

Some lenders are cautious where spray foam insulation has been installed because they may be concerned about issues such as:

• whether roof timbers can be properly inspected;
• trapped moisture or condensation;
• the condition of the roof structure beneath the foam;
• the quality of the installation;
• the adequacy of ventilation;
• future marketability of the property.

Each lender has its own lending policies, and every property should be considered on its own facts. Some lenders will lend following further investigation, while others may decide that the risks are unacceptable.

Why Is the Seller Usually the Person Who Suffers the Loss?

It is often assumed that the buyer is the person affected when a mortgage application is refused.

In reality, it is usually the seller who suffers the greater financial consequences.

If a buyer’s lender refuses to lend because of concerns about spray foam insulation, the buyer may simply decide to purchase another property.

The seller, however, is left owning a property that may now be significantly more difficult to sell.

In many cases, the seller may experience:

• the collapse of the agreed sale;
• additional estate agency costs;
• abortive legal fees;
• survey costs;
• ongoing mortgage payments;
• additional insurance costs;
• council tax and utility bills;
• loss of a related purchase;
• a reduction in the eventual sale price;
• pressure to remove the spray foam insulation before remarketing.

Where a chain is involved, the consequences can be even more significant, with multiple transactions collapsing because one buyer cannot obtain mortgage finance.

Do I Have to Remove the Spray Foam Insulation?

Not necessarily.

Whether removal is appropriate depends on the particular property, the condition of the roof, the type of spray foam installed and the concerns identified by the surveyor or lender.

Some installations may be capable of remaining in place following specialist inspection.

Others may require remedial work or removal before a lender is prepared to lend.

Homeowners should be cautious before arranging removal without first understanding why concerns have been raised. Removing the insulation may be expensive and, if a legal claim is later pursued, it may also affect the available evidence.

Where possible, photographs, survey reports and expert evidence should usually be obtained before significant remedial works are carried out.

Why Did Nobody Tell Me This Could Happen?

Many homeowners say they were told that spray foam insulation would:

• improve the energy efficiency of their home;
• reduce heating bills;
• increase the value of the property;
• make the property easier to sell;
• not affect future mortgage applications.

Whether those statements were made, and whether they were accurate, will depend on the evidence in each case.

If important information was withheld, inaccurate statements were made, or promises were given that later proved to be false, it may be appropriate to investigate whether there are grounds for a legal claim.

Can I Claim Compensation?

Possibly.

A failed house sale does not automatically give rise to a legal claim.

The key issue is whether there is evidence that another party is legally responsible for the losses suffered.

Depending on the circumstances, claims may arise where:

• the spray foam insulation was installed negligently;
• the installer failed to use reasonable care and skill;
• the installation breached the contract;
• misleading representations were made before installation;
• the installation caused damage to the property;
• the installation was unsuitable for the property;
• important information was not disclosed.

Each claim will depend on its own facts, the available evidence and the losses that have been suffered.

What If the Installation Company Has Gone Out of Business?

This is one of the biggest challenges facing homeowners.

Spray foam insulation is often installed many years before any problems come to light. By the time a homeowner attempts to sell the property, the installer may:

• have ceased trading;
• have been dissolved;
• have no significant assets; or
• have insufficient insurance to satisfy a successful claim.

This means that even if the homeowner has a strong legal claim, recovering compensation from the installer may not be straightforward.

For this reason, identifying the correct defendant at an early stage is extremely important.

What If I Paid for the Spray Foam Using Finance?

This can significantly change the legal position.

Many spray foam insulation installations were paid for using:

• a finance agreement;
• a regulated loan;
• a credit card; or
• another form of consumer credit.

Where all or part of the installation was funded using qualifying credit, the Consumer Credit Act 1974 may provide an additional route to compensation.

Depending on the circumstances, the finance provider may share legal responsibility for breaches of contract or misrepresentations made during the sale.

This can be particularly important where the installation company no longer exists or cannot satisfy a judgment.

Unlike a dissolved company, a regulated lender is generally capable of paying compensation if a claim succeeds.

What Compensation Could You Claim?

The amount of compensation will depend on the individual circumstances of each case.

Potential losses may include:

• the cost of removing defective spray foam insulation;
• roof repairs;
• remedial works;
• the reduction in the value of the property;
• additional mortgage costs;
• estate agency fees;
• abortive legal costs;
• survey fees;
• storage costs;
• additional moving expenses;
• other reasonably foreseeable financial losses caused by the defective installation.

Not every loss will be recoverable, and each claim will depend on the available evidence and the applicable legal principles.

How MJV Solicitors Can Help Homeowners with Spray Foam Insulation Claims

At MJV Solicitors, we focus on helping homeowners where there is evidence that spray foam insulation has caused genuine legal problems.

We do not generally act for clients simply because they regret having spray foam insulation installed or because a lender has raised questions about it.

Instead, we focus on claims involving evidence of:

• poor workmanship;
• breach of contract;
• negligence;
• misrepresentation;
• property damage;
• disrepair;
• financial loss arising from defective installations.

We are happy to advise homeowners regardless of how the installation was funded.

Where the proposed claim is solely against the installation company, we will usually act on a private paying basis. This is because installers may no longer be trading or may not have sufficient insurance or assets to satisfy a successful judgment, making “no win, no fee” funding inappropriate in many cases.

However, where the installation was wholly or partly funded using credit and there is a viable claim against a lender under the Consumer Credit Act 1974, we may be able to consider funding options such as a Conditional Fee Agreement (often referred to as a “No Win, No Fee” agreement) or a Damages Based Agreement.

Every case is assessed individually based on the available evidence, the proposed defendant and the prospects of recovering compensation.

What Should I Do If My Sale Has Fallen Through?

If your property sale has collapsed because of spray foam insulation, it is sensible to preserve as much evidence as possible before taking further action.

This may include:

• the survey report;
• mortgage lender correspondence;
• estate agent correspondence;
• the original installation contract;
• invoices and receipts;
• finance agreements;
• photographs of the installation;
• guarantees and warranties;
• expert reports;
• evidence of any financial losses.

If removal of the spray foam insulation is being considered, it may also be sensible to obtain appropriate expert advice beforehand so that important evidence is not lost.

Need Advice About a Spray Foam Insulation Claim?

Discovering that your house sale has fallen through because of spray foam insulation can be both stressful and expensive. While not every property with spray foam insulation will present mortgage difficulties, some homeowners experience significant financial losses when buyers withdraw or lenders refuse to lend.

Whether compensation is available depends on the facts of the case. If the installation was carried out negligently, breached the contract, was misrepresented or caused damage or financial loss, there may be grounds for a claim. Where the work was funded using qualifying consumer credit, there may also be a claim against the finance provider under the Consumer Credit Act 1974, which can provide a more realistic route to recovering compensation than pursuing an installer who is no longer trading.

If you think you may have a spray foam insulation compensation claim, get in touch, and our team will review your situation.

Call: 01253 858231

Email: info@mjvlaw.co.uk

Make an online enquiry.

Read our previous blog, “Spray Foam Insulation Scandal”

Frequently Asked Questions About Spray Foam Insulation Claims