Is your property at risk of flooding?

Many properties are now at risk of flooding. Insurance for flood damage is going to become increasingly expensive and difficult to obtain. Lack of such insurance may make a property unsaleable

Please note that we do not have the expertise to advise on whether or not a property is at risk of flooding. You should take advice from your surveyor or other environmental expert. The purpose of this note is merely to highlight the risk

We set out below an extract from recent guidance issued by the Law Society

1. Flooding risks

The Environment Agency estimates that one in six homes in England (approximately 5.2m properties) are at risk from flooding. Of these, 1.4m are at risk from rivers or the sea alone, 2.8m are at risk from surface water alone and 1m are at risk from both. An estimated 200 homes are at risk of complete loss to coastal erosion over the next 20 years or so, and 2,000 more could potentially become at risk over this period
It may not always be obvious that a property is at risk of flooding. Properties at risk do 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.

The most common types of flooding are:
• Surface water flooding – occurs when heavy rainfall overwhelms the drainage capacity of an area.
• Sewer flooding – occurs when sewers are overwhelmed by heavy rainfall or when they become blocked.
• Groundwater flooding – occurs when underground water levels rise above surface level. This is most likely to occur in low lying areas underlain by permeable rocks.
• River flooding – occurs when a watercourse cannot cope with the water draining into it from the surrounding land.
• Coastal flooding – results from a combination of high tides, low lying land and, sometimes, stormy conditions.
While this note is primarily concerned with the issue of flood risk in the context of the purchase, lending on, or leasing of property, flood risk has the potential to impact on all those owning or occupying property.
If the government and the Association of British Insurers have not negotiated measures to take effect in place of the Statement of Principles before 1 August 2013, or have not agreed to extend its application, when the current statement expires the insurance market is likely to change adversely for properties perceived to be at risk of flood events. Even if agreement is reached it may not benefit commercial property.

2. Where can you find more information

The main ways of learning more about the risk of flooding are:
• conducting searches
• making enquiries of the seller
• instructing a valuer or surveyor to carry out physical inspection, survey or valuation generally and to provide advice on the impact of flood risk
It may not be sufficient to rely on the results of any one category of investigation alone.
Different clients, including lenders, will have different appetites for risk.
You should consider advising your clients before they enter into a binding commitment to buy, lease or finance property that they should:
• Establish the terms on which buildings insurance, including flood risk cover, is available.
• Discuss the level of risk to which the property is exposed with their building surveyor or, if necessary, a flood risk assessment consultant.
Where appropriate you should discuss with your client whether they are instigating their own investigations. As a result you may wish to make further enquiries of a commercial company. You may wish to record these discussions and your clients’ decisions.

3. Specialist surveys

Your client may wish to commission a specialist survey of the land to be acquired to provide further information in relation to flood risk. The following organisations may be able to assist in providing suitably qualified professionals:
• 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 efficacy of existing flood mitigation measures.
The Flood Risk Report has been developed by government and industry. It is a standard template for recording flood risk before and after the installation of flood resistance and resilience measures.
Provided that a suitably qualified and independent professional surveyor has completed the report, it may be useful for your clients to provide it to their prospective insurers. Insurers may consider any flood protection measures when assessing the terms they will offer.

4. Buildings insurance

Some insurers may have investigated the insurance risk by collating data sets in order to evaluate the terms on which they are willing to insure against flood risk. Encouraging your client to investigate the terms on which insurance is available from a number of different insurers can contribute to their assessment of the likely level of flood risk.
Even if the property is leasehold and the landlord insures, if flood becomes an uninsured risk, the tenant may be liable to make good any flood damage depending on the wording of the lease.
The Law Society Standard Conditions of Sale (fifth edition) oblige the buyer to assume the risk from exchange of contracts. You should discuss the liability to insure with the buyer if appropriate.
For leasehold properties the responsibility may lie with the landlord. For freehold properties it is likely to be the responsibility of the buyer. You should consider advising the buyer to investigate the terms on which buildings insurance is available for all risks, including flood, prior to being committed to the purchase.
Where a property is perceived to be at risk of flooding, insurers may decline to insure, require high premiums, impose high excesses or impose unusual conditions. The British Insurers Brokers Association may be able to assist in locating specialist brokers if your clients encounter difficulties.
The Department for the Environment, Food and Rural Affairs have produced a guide, ‘Obtaining flood insurance in high risk areas’, for those experiencing difficulty in obtaining flood insurance.
Clients who are buying and encounter difficulties in obtaining insurance on usual terms will be on notice of the risks and may not wish to proceed at all, or at the same price, as a result. They may not be able to proceed, even if they wish to, if this prevents their being able to obtain suitable mortgage finance.

5. Other sources of information

The Environment Agency – Flood Map and other flood protection resources
• Land Registry flood risk indicator
• RICS: A clear guide to flooding for property owners
• The Flood and Water Management Act 2010
• (The Water Industry (Scheme for Adoption of Private Sewers) Regulations 2011)[ “The Water Industry (Scheme for Adoption of Private Sewers 2011”)
• National Flood and Coastal Erosion Risk Management Strategy
• The National Flood Forum’s Blue Pages Directory
• Flood Protection Association
• Know Your Flood Risk