Flooding has always been served to us as a timely reminder of how environmental factors can destabilise property values. With the Environmental Agency previously stating that one in six homes in England are vulnerable to flooding, it is to be expected that the risk of flooding should be a talking point in the transaction process, principally because of the significant ramifications it can have on a client.
If a household is in danger of flooding, it may be challenging to attain a mortgage, suitable insurance cover or even sell the property. Accordingly, in 2013, the Law Society published a practice note on flood risk, which was updated last month on Friday 18th December 2014, as a means to provide solicitors with information that will aid clients in comprehending the flood risk that is associated with having an interest in a property.
Flooding is a risk that may not always be obvious to clients, as properties can be exposed to flooding without needing to be close to a river or the sea, for instance through surface water flooding when substantial rainfalls overwhelms the drainage or sewage systems. Consequently it is important that in all transactions, a conveyancer or solicitor must discuss the issue of flooding to a client and make subsequent investigations if appropriate. Such investigations should consist of conducting searches, making enquiries and instructing a surveyor, who can carry out a physical survey of the land and then provide advice on the potential impact of flooding.
It is important to understand that different clients will have different appetites for the risk they are prepared to take. For example, more searches and enquiries may need to be made if acting for a lender. Flood risk, after all, may play a significant role in the lender’s valuation process of the property. Obtaining detailed and correct information will allow your clients to negotiate on price and ensure they acquire acceptable terms for flooding insurance, before contractual commitments are made.
The revised note doesn’t change its recommended practice for conveyancers or solicitors. Instead the revisions include precise guidance of flood maps and information regarding incoming not-for-profit scheme Flood Re. These food risk maps are issued by the Environmental Agency and are available for to the public via the website. They provide a national assessment of the prospect of flooding from large bodies of water in any location of the country. The Law Society stress it would be bad practice to rely on these maps as the sole means of assessing flood risks, particularly as they only determine the risk to the general area – not the specific property. Furthermore, although they offer up to date information on the potential flooding from rivers, seas, surface water and reservoirs, they do not cover flooding from groundwater.
Upcoming insurance scheme Flood Re is designed to allow homeowners occupying a property at high flood risk, to obtain affordable flood insurance at a fixed price. This will be achieved by annual premiums being capped and any pay-out will be taken from a central pool of money. Insurers will sell policies to the customers using the normal methods, but can then pass the risk of that policy to Flood Re, which pays out to the insurer if a claim is made. The contractual responsibility for paying out to the customer still rests with the insurer. However, they now have their own back-up pool they can claim against. As a complex undertaking, Flood Re is expected to be in place in summer 2015.
Solicitors and conveyancers play a crucial role in helping clients understand flood risk and what steps can be taken to marginalise this risk. Therefore, the practice note is an essential read and can be viewed at http://www.lawsociety.org.uk/support-services/advice/practice-notes/flood-risk/.
