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Great expectations In the conveyancing process, clients’ expectations of flood risk investigations ‘as standard’ are misaligned, despite insurance risks and legislation changes set for 2013, as David Mole reports.
• 55% of buyers expect their solicitor to investigate a property’s flood risk automatically as part of the conveyancing process • 80% of UK homeowners would not buy a house that was at risk of flood but only 42% of people investigated their flood risk before buying their home The CML states that, in order to protect both the borrower and the lender, it is a requirement of all mortgages for the property to be covered by standard buildings insurance, including flood cover, for the full term of the contract. If insurance is not available, then it is likely that a purchaser will not be able to obtain a mortgage. The Statement of Principles: Impact on Insurance The Statement of Principles, an agreement between the insurance industry and the Government which committed insurers to continue to provide flood insurance for most homes and small business premises (even in areas of significant flood risk) is scheduled to come to an end on 30 June 2013 and will not be renewed. As a result, the ABI declared insurers would return to ‘risk-based’ pricing following the end of the Statement of Principles unless they and the Government come up with an alternative. The impact of this is that owners of properties with significant or high flood risk are likely to find that their premiums or excess increase or that certain conditions are imposed on cover. I know of several cases whereby insurance has
increased by two-thirds and the excess amount has risen to as much as £15,000£20,000 – and they are among the lucky ones; those at greatest risk may not be able to obtain flood cover at any cost. Added to this, where flood insurance is not available, the property owner may be in breach of their mortgage. Flood Risk Assessments It is crucial, therefore, for legal professionals to encourage their clients (whether the purchaser, tenant or the lender) to obtain a desktop flood report for any property they are considering purchasing or taking a lease of. This will highlight any potential problems, enabling legal professionals to research whether insurance cover will be available & affordable and to discuss flood resistance or resilience measures at a stage when it is still possible to renegotiate the purchase price or cost of the lease. Solicitors need not, however, become data or mapping experts, or even hydrologists, to understand the various types and levels of flood risk; help is at hand. Desktop, conveyancing-ready reports are easily available to solicitors, making their job of providing a comprehensive service for their clients very straightforward.
Common myths, such as “I don’t live near a river or the coast so I can’t be flooded” and “I live on a hill so it won’t happen to me”, need to be dispelled. I strongly urge solicitors to recommend clients obtain a comprehensive flood report as standard practice. Common myths, such as ‘I don’t live near a river or the coast so I can’t be flooded’ and ‘I live on a hill so it won’t happen to me’ need to be dispelled. The flooding which occurred in Wales during June of this year took place in some
areas that have not flooded in over 80 years. Flash flooding is the most frequent type of flooding in the UK and, as demonstrated by the rainfall this summer, homes do not need to be near a river or the coast to be affected; it can happen anywhere to anyone, often with little warning. Every individual has a different risk profile and offering a comprehensive flood report as standard practice removes the assumption of risk on their client’s behalf. Our Homecheck Professional Flood Report, www.homecheckpro.co.uk, is a desktop, conveyancing-ready flood risk screening report designed to enable property professionals to assess the risk of flooding at residential properties. Following feedback from our customers, the report has recently been significantly enhanced to ensure the clearest risk analysis possible and includes new data sets to provide a comprehensive assessment covering all types of flooding. From 1 July 2013 onwards, if a property is ‘at significant risk’ it may prove extremely expensive - if not impossible - to obtain flood insurance. If a property cannot be insured, the solicitor will be unable to provide the necessary Certificate of Completion to the Lender to release the mortgage funds and the buyer will be unable to complete the purchase. David Mole, Director of Environmental Due Diligence for Landmark Information Group
ML // November 2012
* OnePoll survey, August 2012.
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recent survey has revealed that 55% of property owners in the UK expect solicitors to automatically investigate a property’s flood risk as part of the conveyancing process. The survey, commissioned by Landmark Information Group, has also highlighted that, despite 80% of UK homeowners stating that they would not buy a house that was at risk of flooding, only 42% of people actually investigated their flood risk before buying their home.