Tom Backhouse, CEO at Terrafirma is interviewed by David Opie of Today’s Conveyancer…
We know the property sector has taken off in the last 6-8 weeks… has Terrafirma seen a similar rise in volumes?
Like so many we had a great start to the year and then all of a sudden, we were hit for 6. Our report volumes dropped by 70% in April and May.
Over the last few months we’ve committed a significant amount of work into monitoring the “search deficit;” systematically reviewing listing data to consider where we are vs where we might have been, even accounting for the significant uptick in volumes over the last 8 weeks. However, like so much of the industry we are still around 20% down YTD.
That said, as a business we are in a good place. We’re at the end of a 12 month development cycle which has brought much of our IT in-house which meant we came out of lockdown in a stronger position.
One of the big things we’ve noticed (which I think is telling of the risk averse nature of law firms looking to reduce liability anywhere they can, PI being the holy grail), is an increase in volume where firms are cutting out periphery risk like coal mining and ground risk.
Our whole business model is to remove risk, so lawyers don’t have to do any form of interpretation whatsoever.
In a sector that is increasingly obsessed by data, what innovations are you seeing and what are your predictions?
You’re right, everyone is obsessed by data.
My view is that if data is accessible, interpreted and trusted then it can be very powerful to help make decisions quicker.
If data is one part of the equation, then interpretation is the other. It’s something we’re conscious of at Terrafirma, and having seen where it can go wrong, it’s important you don’t just take data at face value, otherwise you risk missing the bigger picture.
I often talk about “the absence of evidence, is not evidence of absence;” I believe you must always consider the gaps between the data.
Interpretation used to be the preserve of consultancy. Spending many hundreds or thousands of pounds for that expertise and risk assessment.
Now, the real innovation for me is not just digitising and creating data but also digitising the way in which we interpret and use data. This will save enormous amounts of money and for property it means being able to make decisions earlier in the process, speeding up the whole transaction.
The most innovative and successful companies will be able to scale up the interpretation of data.
Do we expect too much of conveyancers when it comes to searches? Is there a risk that we now expect conveyancers to be environmental scientists as well as property experts?
As a creator of innovative reports assessing complex physical risks to property, we haven’t done our job properly if that report then needs to be interpreted by a lawyer… it’s as simple as that for me.
When researching and developing our reports, the focus is always to add value and include expert interpretation and advice to aid conveyancers. Professional opinion and interpretation of data is one element, but providing confidence is also important. One thing that I feel very strongly about is that we are held accountable for the information.
For me data, is absolutely not the end product. Interpretation is paramount and with £10 million professional indemnity cover on every report we carry the can if something goes wrong, not the conveyancer.
It is not a conveyancer’s job to be an environmental scientist, geotechnical engineer, or a town planner. Searches must be universal to the extent that they can be read understood by all parties, from the lender to the homebuyer, surveyors etc.
Tell us a little more about the update to the Ground Report you’ve launched; and when it’s going to be of most benefit to conveyancers.
We launched the Ground Report back in 2018 to distinguish between environmental reports and ground risk; we include all types of mining and ground stability but there was one problem left to solve and our experts have worked tirelessly to make coastal hazard risk assessment a reality.
Until very recently no conveyancing search report existed that assessed the risk to property and land from coastal hazards. The reason for this is that it was not possible to assess the risk due to a lack of suitable property-specific data and we are proud to say the Ground Report changes that.
As an island nation there are 640,000 properties within 250 metres of the coast. Many of these properties attract high valuations alongside increasing amounts of development. And while it’s hard to watch the news and see images of people’s homes and possessions collapsing into the sea, the more realistic impact is on the value of property.
To raise awareness of the risk from coastal hazards, our team have created a new interactive story map – ‘The Rising Risks to Coastal Property and Land’. It details five key coastal locations that are on the frontline, and without significant intervention, face the threat of substantial coastal retreat, putting coastal properties and land at risk.
As part of this research, Terrafirma have uncovered, as a worst-case scenario, approx. 31,000 properties and approx. 21,000 acres of land are at risk over the next 100 years from coastal retreat. (This is at 95% confidence, assuming that there is No Active Intervention to manage the coast.)
What’s your advice to practitioners when it comes to using Terrafirma searches? How are they best used to inform the lender and client of the potential risks?
For us it’s important that information is provided in a format and context that is relatable.
Our focus on the ground, unique expertise, and ability to communicate complex ground risks into clear, concise, and actionable advice enables Terrafirma to provide quality service to conveyancers, homebuyers and lenders, ensuring a high standard of risk assessment for property transactions.
This, alongside features such as colour-coded markers so that every party in the transaction knows which action they need to take next, make our reports popular with conveyancers who are aware of the risks the ground can pose to property, and ultimately their property transaction.
We feel strongly that if you’re conveyancing on a coastal property this is really important information to give to your client and the level of interpretation we provide in our brand new coastal hazards module is a good example of what differentiates Terrafirma searches from other mining and ground stability reports.
If you are acting on a property transaction close to the coast this report will now provide the buyer with a good indication of what the impact will be from coastal erosion and coastal flooding over the next 25-50 years.
From the lender’s point of view, they want to know that they’re lending on an appreciable asset. So, for them it’s important to understand what is going to change in the mortgage lifetime. And for the homebuyer, when they come to sell the house is the impact going to have had a negative effect on the property value.
Tom Backhouse was speaking with Today’s Conveyancer.
