As the flooding of the last few weeks pales into a near distant memory, at least for those of us unaffected, what lessons should we draw?
Well, even before the floods arrived, the message coming out from all the Conveyancing CPD presentations we worked alongside last year was about flood risk having increasing significance for conveyancers. Not least because of:
- The expiry of the Statement of Principles between the Association of British Insurers and Government
- The emergence of Flood Re to replace the Statement of Principles from 2015, where it is still not really known how it will work, other than to add at least £10 / household to our Home Insurance Premiums next year
- The reductions in promised Government funding on UK flood defences leaving homes exposed to increased risk and giving rise to the difficult negotiations to conclude the first two items above
- The potential claims from lenders and homeowners further down the line, as they find either they can’t get insurance, premiums become excessive and / or policy excesses become unrealistic, hence properties lose value, or even become properties that cannot be sold.
- The increasing flooding headlines, even before the current spate of bad weather
- Flooding not just being about river and coastal flooding – surface water flooding is perhaps the bigger and unrecognised risk. Even houses built on hills can be at risk, as water cascades down across open fields, across the road and through your front door! This point has also been hammered home in January and February with news reports that flooding could go on into Spring due to the saturated ground, so water comes up from beneath.
- Local Authorities continuing to make financial cuts and those are now falling in the Environmental and Planning departments. Fewer staff are dealing with applications causing delays, with large tracts of land are going uncharted. Planning restrictions have been eased so applications in flood plains are unlikely to be challenged hard by planners.
- The increasing sophistication of flood modelling that is now available to the Insurance industry to predict surface water flooding leading to more targeted risk assessment by Insurers. Properties in the same road could have differing premiums for the same cover
Going forward, the message for firms therefore has to be one of tightening compliance towards “belt and braces”. In much the same way as contaminated land became an issue when it first emerged and is now an accepted norm, so flood risk needs to be considered in a similar vein. So:
- Ensuring Terms of Business carry effective Environmental exclusion clauses
- Purchasers are encouraged to consider very carefully taking out a Flood search and an assessment based on the results – despite the often encountered assertion that they know the area very well and it has never flooded before!
- Training conveyancers in a revised approach to flood risk, particularly with distance conveyancing – several instances have already emerged of conveyancers in the same firm having differing views and procedures to flood risk
- Being aware of what lenders impose through the CML Handbook
As a consequence I’ve been highlighting the issues with firms at Compliance Reviews and generally as I’ve worked with retained clients. Possibly the greatest concern is the approach adopted in cut-price conveyancing, when clients sign a disclaimer to complete their transaction without any searches. Introductory paragraphs to these indemnities pay little attention to the potential impact of flood risk for what could be a relatively modest premium.
And finally, don’t forget for most firms its perhaps another entry for the Risk Register.
By Norman Denton, Associate at Legal Eye