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New Law Society advice on flood risk for home buyers.

Last year’s wet weather brought regular pictures of flooded homes to out TV screens. But it is not just prolonged wet spells that can cause flooding. Many homes are also at risk from rising sea levels and other causes.  

The Environment Agency estimates that one in six homes in England and Wales (approximately 5. 2m properties) are at risk from flooding.  

The problem for buyers is that it is not always be easy to determine if a particular property is at risk. A home does not need to be close to a river or the sea or on low lying ground to be exposed to flood risk. Surface water, groundwater and overflowing sewers are increasingly common causes of flooding.

Apart from the damage which can obviously be caused when flooding does occur it may be difficult or impossible to obtain flood insurance on a home in a high-risk area. This will in turn make it hard to get a mortgage on such a home, and therefore make it difficult to sell. Consequently the market value of such a property is likely to fall dramatically.

Buyers should be alert to flood risk issues

With this in mind the Law Society has just issued a directive to all Conveyancing Solicitors. This sets out advice that homebuyers should be given on flood risk, and the investigations that buyers and their Conveyancing Solicitors should consider making.

In particular the following sources of information should be considered:

  1. the seller
  2. the Environment Agency
  3. an opinion from a surveyor
  4. a detailed flood risk report from a specialist provider

One obvious source of information is to ask the seller. The Law Society has recently revised the Property Information Form which sellers are usually asked to complete. This now not only asks sellers to state if the property has ever flooded, but also asks for details of the cause.  

Sellers are also asked whether their insurance premiums have been subject to any abnormal rise in premiums, or subject to substantial excess.

While a seller may state that no flooding has occurred, this does not necessarily mean that there is no flood risk – many homes flooded last year which had not previously been affected. Also flooding might have occurred before the seller bought the property. Buyers are therefore recommended to ensure that further information is obtained from other sources.  

Don’t just rely on the Environment Agency flood map

The Environment Agency has a useful flood map which shows areas at risk from river or sea flooding. The Land Registry has also launched a flood risk indicator search service, which enables Conveyancing Solicitors and members of the public to obtain reports on specific properties, based on the Environment Agency’s information.

But these searches will only indicate if a property is at risk from flooding from the sea or a river, and cannot be relied on as the sole source of information. Flooding can arise from a variety of causes and buyers are therefore advised to obtain a more detailed search or survey through their Conveyancing Solicitor.  

A number of companies can provide reports based on information collated from several sources, including surface water and groundwater flooding information. Such searches can be obtained through your Conveyancing Solicitor, and the small extra cost is well worth while.

If a search indicates that a property is at significant risk, buyers are recommended to have a more detailed survey carried out by a qualified professional such as a member of the following:

  • Royal Institution of Chartered Surveyors (RICS)
  • Association of Building Engineers
  • Chartered Institution of Civil Engineers
  • Chartered Institution of Water and Environmental Management

A flood risk survey, in addition to providing information about the likely risk of flood, can provide information about steps that can be taken to mitigate exposure to flood damage. It may also analyse the effectiveness of existing flood mitigation measures.

Buyers must make sure they can get flood insurance before contracts are exchanged

All homebuyers have to consider obtaining buildings insurance. If a mortgage is required, the lender will insist upon the property being insured. Although many lenders will arrange buildings insurance if required, borrowers are usually free to arrange their own insurance if they wish.  

Buyers should be aware that insurance cover should always be put in place immediately purchase contracts are exchanged (except where a leasehold property is in a block insured by the freeholder. ) 

Risk passes to the buyer on exchange

Although the property does not change hands legally until final completion, the standard form contracts used in most residential property sales state that the insurance risk passes to the buyer on exchange.  

This means that if the building is damaged between exchange of contracts and final completion, the buyer must still accept it in the damaged condition. So if a house has burnt to the ground or is under two metres of floodwater, the buyer still has to complete the purchase.

In view of this, buyers should get insurance quotes well before exchange of contracts. Although it is often possible to get cover quickly, insurers will consider flood risk as an element when issuing a quotation.  

Should the property be in a high-risk area, or have a history of previous flooding, a buyer could find the premiums quoted will be very high, or a high excess will be required. In that case buyers may need to shop around for cover, or even re-consider their decision to buy 

Mortgage lenders will also be concerned if a property cannot be easily insured, since that will affect its value.

Consequently buyers are now advised to shop around for quotes early on, and not wait until their Conveyancing Solicitors are ready to exchange.  

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