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Will You Have A Flood Risk In Your Home?

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Media reporting of flooding is all too common these days and serves as a reminder of how environmental factors can affect property values.

The Environmental Agency has stated that one in six homes in England is vulnerable to flooding, so it is no surprise that when buying a house the risk of flooding should be a significant issue in the transaction process, principally because of the significant ramifications it can have.

If a house is in danger of flooding, it may be difficult to obtain a mortgage, suitable insurance cover or even sell the property. In 2013, the Law Society published a practice note on flood risk, which was updated in December 2014, as a guide to solicitors to inform clients in understanding the flood risk that may affect a property.

Flooding is a risk that may not always be obvious, as properties can be exposed to flooding even if they are not close to a river or the sea, as surface water flooding can occur when substantial rainfall overwhelms the drainage or sewage systems. Consequently it is important that in all transactions, a solicitor must check the issue of flooding and make investigations if appropriate and advise the purchaser client. Such investigations usually consist of obtaining environmental  searches, making enquiries of the seller and if necessary, instructing a surveyor, who can carry out a physical survey of the land and provide advice on the potential impact of flooding.

It is important to understand that different clients may well have different views on the risk they are prepared to take. For example, more enquiries may need to be made if acting for a lender. Flood risk may play a significant role in the lender’s valuation process of the property. Obtaining detailed and correct information will allow clients to negotiate on price and ensure they acquire acceptable terms for flooding insurance, before a commitment are made to go ahead with the house purchase.

The revised Law Society note does not change its recommended practice for solicitors. Instead the revisions include precise guidance of flood maps and information regarding incoming not-for-profit scheme Flood Re. These flood risk maps are issued by the Environmental Agency and are available for to the public via their website. They provide a national assessment of the prospect of flooding from large bodies of water in any location of the country. The Law Society stress it would be bad practice to rely on these maps as the sole means of assessing flood risks, particularly as they only determine the risk to the general area - not the specific property. Furthermore, although they offer up to date information on the potential flooding from rivers, seas, surface water and reservoirs, they do not cover flooding from groundwater. 

Upcoming insurance scheme Flood Re is designed to allow homeowners occupying a property at high flood risk, to obtain affordable flood insurance at a fixed price. This will be achieved by annual premiums being capped and any pay-out will be taken from a central pool of money. Insurers will sell policies to the customers using the normal methods, but can then pass the risk of that policy to Flood Re, which pays out to the insurer if a claim is made. The contractual responsibility for paying out to the customer still rests with the insurer. However, they now have their own back-up pool they can claim against. As a complex undertaking, Flood Re is expected to be in place in summer 2015.

If you have any further questions regarding a potential flood risk in your property, please call our Residential Property department on 01825 762281.