On 23 May 2013 The Law Society of England and Wales issued its long awaited Practice Note on Flood Risk. For the first time solicitors now have clear guidance on their client obligations with regard to understanding flood risk in a property transaction.
The Practice Note comes days after the revision to the Property Information Form (TA6) which now contains a specific section on flood risk and the disclosure of this information in every residential transaction. The Commercial Property Standard Enquiries Form (CPSE1) also requests disclosure from the seller on flooding.
Our changing climate and the legacy of poor planning decisions that have failed to adequately consider flood risk in urban development, have left many properties across the UK at risk of flooding with the Environment Agency estimating this as 1 in 6 homes.
In addition to the immediate impact flooding with regard to human life, property and possessions, the longer term issues of community disruption and dislocation, business interruption, stock loss and permanent structural damage to buildings can cause widespread misery and cost. Whilst insurance may in some instance provide a partial solution (pending termination of the Statement of Principles now scheduled for 01 August 2013) the wider issues include the potential withdrawal of insurance moving forward and lenders refusing to provide mortgages for properties known to be at risk.
The Practice Note is clear in its acknowledgement of the different types of flooding and that property does not need to be near the sea or a river for flood risk to be a material issue. The Practice Note is also clear on the limitations of flood risk information from sources such as the Environment Agency website where data is limited and is not property specific.
Flood risk searches are cited as a clear and valuable method of surfacing flood risk potential in property transactions. In addition to being property specific, quality search reports contain additional data such as surface water flood risk potential and provide a clear and intelligible flood risk ranking that is evident for anybody reading the report. There are often technical solutions to flood risk with property specific resilience and resistance measures in addition to more substantial schemes serving the wider locality.
GroundSure has been providing advanced flood risk search reports for a number of years and was the first provider in the market to identify the advantage of combined environmental and flood risk search reports. The popularity of these searches is clear with approximately 2 in 3 GroundSure clients carrying a combined environmental and flood risk search. These searches save time and money allowing flood risk to be fully considered in the course of every transaction and avoiding the requirement for supplementary searches to be undertaken.
GroundSure continues to lead on the issue of flood risk in the legal conveyancing market and is part of the COPSO (Council of Property Search Organisations) Working Group developing an industry standard for flood risk searches. We also continue to work with our clients in the banking sector in considering flood risk in secured lending arrangements.
Understanding flood risk at the early stages of a transaction is now more than ever, an essential requirement in terms of provisioning for this both physically as well as commercially. Not having the same degree of risk insight as your future insurer or lender may have significant commercial consequences.