Law Society confirms conveyancers’ duty to advise on climate legal risks in transactions

The Law Society of England and Wales has confirmed conveyancing solicitors’ overall duty to advise on climate legal risks when acting in transactions – though solicitors have been told they “should not advise on climate change physical risks where it is outside their knowledge or qualification”.

The much-anticipated guidance follows a period of dispute and debate around the property industry over the issue, with Stephen Tromans KC’s opinion on the matter in September of last year being a particular point of contention.

This was followed by a suggestion by UK Finance Director of Mortgages Charles Roe that conveyancers are seen as lenders’ “in-house lawyers” – a concept rejected by conveyancers almost unanimously.

Indeed, a subsequent survey conducted by Today’s Conveyancer in conjunction with the Conveyancing Information Executive found 85% of conveyancers did not feel they were under a duty to advise on climate change risk in transactions. 76% said it should sit with the valuer/surveyor, with just one in eight believing the Law Society should have a role in the regulating the way these risks are addressed and managed.

Nevertheless, the issues have been addressed by the Society in what it describes as “milestone” guidance produced by the Climate Change Working Group.

Climate legal risks

One element of climate legal risk is physical risk – for example, extreme weather events. Through their impact on properties, physical risks may generate climate legal risks.

The Law Society gave an example in Annex 2 of its guidance that said, when acting in a real estate / asset-based transaction, solicitors “should advise on physical climate risks and how they impact real estate ownership and use, such as flooding, fire inaccessibility, uninsurability, and availability of capital investment”.

The guidance gave an example of how a solicitor may consider the impact of events on conveyancing transactions:

“Is a climate search needed? Address the impact of climate events on the property within your advice (for instance, if the property is on a flood plain, address increasing flood risk incidence, cost, and availability of insurance, and how this affects the decision to buy and the price).”

The Society did, however, state at 2.1 that solicitors “should not advise on climate change physical risks where it is outside their knowledge or qualification”. Clarifying what this means for conveyancers, a Law Society spokesperson told Today’s Conveyancer:

“Where solicitors have gaps in expertise related to physical risks, they should either not advise or should consider commissioning experts who can.

In annex 2, we offer commissioning climate search reports as an example of a potential solution solicitors may want to begin considering at this stage in the context of this.

However, an appropriate response might also be that the solicitor simply flags the options available, which could include a climate search report, and then proceeds according to the clients wishes.”

Experienced conveyancing trainer Ian Quayle, CEO of IQ Legal Training, said conveyancers “should be advising clients that essential searches and enquiries must be undertaken”, including local searches, enquiries of local authority, drainage and water searches, and environmental searches.

“Client should be told of necessary searches dependent on locality, property, and buyer client objective,” said Quayle, adding:

“I then maintain it is good practice to explain to clients which other searches are available and invite the client to consider whether any of those searches should be undertaken.”

“As for a climate change report,” he said, “I would put this in the category of search that the client should be made aware of.” He offered a “word of caution” as to the way such issues can become a crucial consideration overnight:

“I remember when chancel repair liability was a quirky concept that land lawyers and academics might deliberate over but was of little or no consequence to transactional property lawyers. An infamous negligence claim later, and all of a sudden chancel repair liability became a real issue for conveyancers and spawned a new insurance product.

It is not beyond the realms of possibility that in the future a client or clients will sustain loss as a consequence of climate change and will be encouraged to bring a claim in negligence against a conveyancer and will be successful.

Being the cautious person that I am, I maintain my stance that clients should be made aware of the availability of a climate change report and perhaps it ought to be recommended.”

Aside from physical risks, other reasons solicitors may take account of climate legal risks include new climate-related legislation and regulation – for example, minimum energy efficiency standards – as well as alteration of existing legislative or regulatory requirements.

The Law Society also highlighted “shifting client expectations, duties of care, and competency requirements” that could create risks for solicitors, firms, and clients alike, noting that claims for damage to assets or breach of contract related to climate change are “most likely to relate to conveyancing”.

Practical implications

The Society touched upon several professional duties related to climate change, chiefly a duty of care, reiterating solicitors’ general legal duty to exercise reasonable care and skill to the standard of a reasonably competent practitioner, arising from Midland Bank Trust Co Ltd v Hett Stubbs and Kemp [1979]. This means solicitors “may have to look beyond the narrow scope of instruction by a client to consider whether and to what extent climate legal risks are relevant”, said the Society.

This is flanked by the duty to warn clients about potential risks by pointed out hazards of a kind which should be obvious to the solicitor but that the client may not appreciate, arising from County Personnel (Employment Agency) v Alan R Pulver & Co [1987]. This, said the Society, may be impacted by climate change legal risks in “certain contexts”.

The Society went on to list the duty to disclose as well as the duty to uphold service and competence levels, stating solicitors “must ensure that they provide a proper standard of service to their clients”, adding that “in doing so [they] should have regard to the SRA’s regulatory requirements”. They subsequently referred solicitors to the continuing competence requirements of solicitors as well as the SRA’s statement of solicitor competence.

Climate change’s impact on the solicitor-client relationship

The Law Society said that, as climate change reaches further into society and the law, solicitors should adopt a “proportionate approach” to climate change when advising clients, considering factors such as:

• The nature of the client’s operations and interests.
• The specifics of the matters.
• The legal services offered.
• The impact of the issue on the clients, the transaction, the climate, and public.

This means that, when presented with a new instruction, solicitors are expected to consider whether climate legal risks may be material to their advice at the outset.

The scope of the retainer is also of note, with the Society stating:

“In certain circumstances, it may be possible to exclude climate issues specifically from your retainer, for instance, where you are not competent to advise or where the client is directed to more expert technical advice.”

The Society said any such agreement is recommended to be confirmed in writing, adding that “the informed consent of the client should be obtained to any such exclusions from the retainer where there are, or could be, material climate legal risks beyond the competence of the relevant solicitor”.

They did, however, add the caveat that “where climate legal risks are relevant, it is becoming less realistic in practice to exclude consideration of such matters from the instruction completely, given that they impact so many areas of activity”.

It is unclear at this juncture whether conveyancers are able exclude climate issues specifically from their retainers.

PII implications

On the issue of professional indemnity insurance and how it may be impacted by climate change, the Society said:

“Insurers are […] giving greater attention to climate issues and the risks they pose to their business. Solicitors should be mindful of current and prospective requirements of professional indemnity insurers so that solicitors can obtain affordable cover for the areas of practice upon which they wish to advise […]

To obtain PII cover, in the future solicitors may need to demonstrate how they are equipping themselves to be able to advise on climate legal risks and identify when they are not competent to advise.”

This follows Philip Armstrong, owner of Armstrong Solicitors in Northern Ireland (NI), suggesting late last year that professional indemnity insurers “must surely be asking the question” regarding the climate change advice responsibility mooted to fall upon conveyancers.

Next steps

Further sector-specific guidance on particular areas of law will be published by the Law Society addressing how solicitors should advise clients on climate change legal risks, as well as guidance on if and when conveyancers should commission climate search reports.

Access the full guidance.