Monday, 17 February 2014

When the Flood Waters Recede, Will Conveyancing Lawyers Face a Deluge of Claims?

While debate in the last couple of years has centered on availability of flood insurance, that conversation will soon turn to the impact of flooding on property values and what solicitors advised clients on flood risk and the availability of flood searches.

Because a serious flood event typically drives down the value of a property, the inevitable knock-on effect will be an increase in claims against solicitors who may not have advised their clients to consider the risk of flooding or carry out appropriate searches. Flood searches are now more common but what about the millions of house purchases that took place in the last six years?

PI Insurers will be asking whether solicitors have been negligent about fully considering flood risk and whether this has left an exposure.
Solicitors are not qualified to give advice on flood risk but there are a number of checks that can be undertaken on a buyer’s behalf which will give them a better understanding of the risks. Many solicitors have been lax at asking the right questions and banks have been lamentable at considering the appropriate risk to their security. 

The CML Handbook, for example, makes no direct mention of flood risk (other than requiring it to be an insured risk). The absence of legal enquirers has somewhat been addressed by the Conveyancing Protocol forms which now ask the vendor to disclose if the property has been flooded in the past, but is this the case of locking the gate after the horse has bolted?

Lawyers can expect a question coming soon on their PI Renewal forms along the following lines: 

Over the last five years what processes has the Firm (and any Prior Practice) had in place to ensure that clients were advised about flood risk and the availability of flood searches ? If there has been a material change in your procedures, please provide dates as appropriate.

And, while you may think I am scaremongering, ask yourself a simple question: 

Would you want to live in a home where there is real chance that you and your family would have to shovel out sludge and sewage? 

The answer is likely either ‘No’ or ‘only if it is very, very cheap’.

The housing market seems already to adjusting pricing for flood risk. Between 2008 and 2012 property prices rose in four out of the five Lincolnshire postcodes with the lowest flood risk. They fell in four out of the five areas of highest risk (see chart).  That's not just coincidence.




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