1.1 Who should read this practice note?
Solicitors involved in property transactions.
1.2 What is the issue?
Flooding is a growing risk for British property. Aside from physical damage caused by floods, if a property is at risk of flooding it may be difficult to:
- obtain a mortgage
- obtain suitable insurance cover, or
- sell the property.
This is likely to affect the value of the property.
Solicitors are not qualified to give advice on flood risk or interpret technical flood reports. However, this note aims to provide you with information to help your clients investigate the terms on which buildings insurance cover, including flood risk, is available, prior to their entering into contractual commitments.
It provides general information in relation to flood searches and other means of investigation.
You should encourage your clients to make sure that insurance can be obtained for the property on acceptable terms before entering into a contract.
You should also liaise with clients in relation to which, if any, flood searches or other investigations, may be appropriate.
1.3 Professional conduct
The following sections of the SRA Code are relevant to this issue:
- Chapter 1 on client care
- Chapter 6 on Your client and introductions to third parties
Practice notes are issued by the Law Society for the use and benefit of its members. They represent the Law Society's view of good practice in a particular area. They are not intended to be the only standard of good practice that solicitors can follow. You are not required to follow them, but doing so will make it easier to account to oversight bodies for your actions.
Practice notes are not legal advice, nor do they necessarily provide a defence to complaints of misconduct or of inadequate professional service. While care has been taken to ensure that they are accurate, up to date and useful, the Law Society will not accept any legal liability in relation to them.
For queries or comments on this practice note, contact the Law Society's Practice Advice Service.
2. Flooding risks
The Environment Agency estimates that one in six homes in England are at risk from flooding. Of these, 2.4m are at risk from flooding from rivers or the sea alone, 3m 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 (see Flooding in England: A National Assessment of Flood Risk (PDF)).
In Wales, over 200,000 properties are at risk from sea or river flooding and approximately 230,000 properties are at risk from surface water flooding.
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.
- Flooding as a result of localised private drainage failure - for example failure in the operation of soakaways. This is the main reason for flood claims in the UK.
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.
2.1 Flood Re
In June 2013, the government agreed a Memorandum of Understanding (MOU) with the Association of British Insurers (ABI) to develop a not-for-profit flood insurance scheme, known as Flood Re. This MOU replaces the Statement of Principles, which previously governed the position. The government consulted on several aspects of the Flood Re scheme in June 2013. Small and medium-sized enterprises (SMEs) are excluded from the scheme, which is intended only to cover homes.
Flood Re is intended to ensure that homeowners whose properties are at high flood risk can obtain affordable flood insurance with cover at a set price. It applies to 'household premises' which are defined in the Flood Reinsurance (Scheme Funding and Administration) Regulations 2015 (SI 2015/1902) as:
(a) a dwelling which meets the criteria relating to 'household premises' set out in sections 4.7 to 4.9 of the Scheme Document dated 16 March 2015 and designated as the Flood Reinsurance Scheme by the Flood Reinsurance (Scheme and Scheme Administrator Designation) Regulations 2015(2); or
(b) a building in the United Kingdom which:
(i) is held for private residential use and comprises two or three residential units, and includes any garage, shed or other building which forms part of, and is enjoyed with, the building, and
(ii) meets the criteria relating to 'household premises' set out in sections 4.7 to 4.9 of the Scheme Document
Properties will be eligible only if they meet all of the following criteria:
1. The insurance contract must be held in the name of, or on trust for, one or more individuals or by the personal representative of an individual
2. Have a domestic Council Tax band A to H (or equivalent)
3. Used for residential purposes
4. Have an individual premium
5. The holder of the policy, or their immediate family, must live in the dwelling for some or all of the time (whether or not with others) or the dwelling must be unoccupied
6. Built before 1st January 2009 (if a building built pre 1st January 2009 is demolished and rebuilt, the new property is still eligible)
7. Located within the UK comprising England, Wales, Scotland and Northern Ireland (excluding the Isle of Man and the Channel Islands)
The following risk categories will be interpreted as being eligible as long as they also meet the eligibility criteria set out above (this is a non-exhaustive list):
a) bed and breakfast premises paying council tax and insured under a home insurance contract
b) farmhouse dwellings and cottages, where farmhouse dwellings are included in a commercial line policy, provided the insurer can split out the dwelling element (which meets the criteria 1-6 (inclusive) above), that part of the risk can be ceded to Flood Re
c) holiday/second homes
d) home workers
e) individual leaseholders protecting own dwelling
f) leasehold blocks will be eligible for buildings cover if they contain three units or fewer, and the freeholder(s) lives in the block. Leasehold blocks will not be eligible for the buildings cover, regardless of the number of units, if the insurance contract is held in the name of a management company.
g) residential 'buy to let' (which meet the criteria 1-6 (inclusive) above) mobile homes if in personal ownership. Many ‘buy to let’ properties will not meet the requisite criteria because the owner (and policy holder) will not live at the premises all or some of the time.
h) tenant's / individual's contents (even if living in large block/flats, where the buildings risk would not be eligible)
Example of risk categories that will not be eligible for ceding to Flood Re as part of a buildings or combined policy (this is a non-exhaustive list):Flood Re published
a) bed and breakfast premises paying business rates
b) blocks of residential flats
c) company houses/flats
d) contingent buildings policies (eg held by banks)
e) farm outbuildings (not included in the definition of a dwelling)
f) freeholders/leaseholders insuring blocks/large numbers of properties in a portfolio for commercial gain
g) housing association's residential properties
h) multi-use under commercial or private ownership
i) residential 'buy to let' (which do not meet the criteria 1-7 (inclusive) above)
j) social-housing properties; (eligible for contents cover but not eligible for buildings cover)
k) static caravan site owners (for commercial gain)
Details of eligible and non-eligible properties can be found on the www.floodre.co.uk/eligibility.
Certain categories of properties (for example some buy-to-let properties and properties built after 1 January 2009) are excluded from the scheme.
Flood Re will become operational in April 2016. In the meantime, ABI members will voluntarily continue to abide by the terms of the Statement of Principles. This means that insurers will continue to provide cover to existing customers who are not at significant risk of flood, or whose properties are in locations where the government has announced plans to reduce flood risk to below 'significant' level within five years. The cost of insurance premiums and excesses will reflect the insurer's understanding of a property's flood risk.
The GOV.UK website has further information about Flood Reinsurance (Scheme Funding and Administration) Regulations 2015, including the scope of, and exclusions from, the scheme.
Flood Re published the first Flood Re transition plan in February 2016 which outlines how it intends to manage the transition to home insurance prices that fully reflect flood risk. It is intended that the report will be updated at least every five years. There is also further information on the Flood Re website.
3. Conveyancing transactions
3.1 When acting for a buyer, tenant or lender
In all conveyancing transactions, when acting for a prospective buyer, tenant or lender, you should in all cases consider whether or not to mention the issue of flood risk to your client and, if appropriate, make further investigations.
The main ways of learning more about the risk of flooding are:
- conducting searches and obtaining reports from government bodies and/or commercial providers (for example by postcode search of the Environment Agency website This information is indicative only and is constantly being updated). More detailed information may be obtained from commercial providers and making enquiries of the seller, and
- instructing a valuer or surveyor to carry out a 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.
Different clients, including lenders, will have different appetites for risk.
Before your client enters into a binding commitment to buy, lease or finance property you should:
- consider advising the client to establish the terms on which buildings insurance, including flood risk cover, is available
- consider advising your client to 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 client's decisions.
3.1.2 Riparian obligations
The buyer may be a riparian owner and may have additional rights and responsibilities. In these circumstances you may wish to refer your client to the Environment Agency guide 'Living on the Edge - A Guide to your Rights and Responsibilities of Riverside Ownership which provides an introduction to the principles of riparian ownership.
3.2 When acting for a lender
You may have additional obligations when acting for a lender. Lenders are increasingly likely to investigate the potential flood risk of prospective security either as part of their valuation process or by searching. Lenders may impose additional requirements in their instructions to you as a result of their investigations. Lenders' requirements will vary.
The section in the CML Handbook about insurance has been amended. You are required to make reasonable enquiries that buildings insurance cover has been arranged for the property no later than completion. You should remind the borrower that they must have buildings insurance in accordance with the requirements of the mortgage no later than completion and that they must maintain such insurance cover throughout the mortgage term.
3.2.2 Commercial transactions
In commercial transactions, the lender will usually instruct you as to their insurance and other requirements. Lenders' requirements will vary.
4. Flood searches
4.1 Government agencies
4.1.1 The Environment Agency flood maps
The Environment Agency website allows the public to view information on flooding from rivers, the sea, surface water and reservoirs. It does not give information about risk of flooding from groundwater.
The following maps are available on the Environment Agency website:
126.96.36.199 Risk of Flooding (Rivers and Sea) Map
The Risk of Flooding (Rivers and Sea) Map provides a national assessment of the likelihood of flooding from rivers and the sea at any location. It takes into account flood defences, predicted flood levels and ground levels. It provides an indicative flood rating for a 50m x 50m grid square and describes the risk of flooding based on four categories.
The Risk of Flooding (Rivers and Sea) Map does not:
- give information about a specific property,
- provide information on flood depth, speed or volume of flow
- show flooding from other sources such as groundwater, surface water flooding, or overflowing sewers.
188.8.131.52 Risk of Flooding (Surface Water) Map
The Risk of Flooding (Surface Water) Map incorporates local surface water flood risk information. It provides an indication of where water will collect and flow. And depth and velocity information for high, medium and low chances of flooding.
The Risk of Flooding (Surface Water) Map does not give information about a specific property.
184.108.40.206 Risk of Flooding (Reservoirs) Map
The Risk of Flooding (Reservoirs) Map models the worse case scenario extent of flooding if a reservoir was to fail and release the water it holds.
220.127.116.11 Other area maps
- Separate PDF maps are available that show what is at risk of flooding (e.g. people, infrastructure, property) at a river basin district scale.
- Because of these limitations of the Flood Maps, they should not be used as the sole means of assessing the flood risk for a property.
- The Environment Agency service is only designed to be used by the general public.
4.1.2 Natural Resources Wales flood maps
General information about flood risk in Wales is available on the Natural Resources Wales website. This should not be used as the sole means of assessing the flood risk for a property.
It is anticipated that the public will be able to view information flood risk maps for Wales on the Natural Resources Wales website from March 2015.
In the meantime, the Environment Agency Flood Maps (see section 5.1.1.) can be used to find out more about flood risk in Wales.
4.1.3 Land Registry Flood Risk Indicator
Land Registry has combined its data with flood data from the Environment Agency and Natural Resources Wales to produce its Flood Risk Indicator, which provides information about the possible risk of flooding to a property.
The result is provided on a title-by-title basis for registered properties within England and Wales. It can be purchased online via Land Registry's Find a Property Service.
Land Registry states that the information only shows the predicted likelihood of flooding from rivers or the sea for defined areas and notes that it is not detailed enough to account for precise properties.
As noted above, the Land Registry data is based on the Environment Agency and Natural Resources Wales data, and so the Flood Risk Indicator should not be relied on as the sole means of assessing flood risk for a property.
4.2 Screening reports
Screening reports are first-stage, high-level, non-property specific reports that do not require the organisation supplying the report to visit the property. Screening reports are often available at low cost and provide quick results.
However, they provide limited information. They may provide an indication as to whether further investigation would be merited. These searches may use data from local authorities, British Geological Survey, Environment Agency, Natural Resources Wales and Land Registry.
The Environment Agency Flood Map and the Land Registry Flood Risk Indicator are both types of screening reports.
4.3 Commercial searches
Some commercial searches provide information about all kinds of flood risks, including surface water and groundwater flooding information.
The market for flood searches is not regulated. There are different types of searches available with marked variations in the cost, quality, range, analysis and interpretation of data.
It is not always easy to establish which data sets are being used, how accurate the data is and how often it is updated. Before choosing a search provider, you should attempt to check that the search will provide the information most aligned with your client's requirements, which may not be straightforward.
Providers and their products are subject to change.
As well as providing information from various data sets, a flood search should also provide an assessment of the risk of flooding. Depending on the means used to describe the likely incidence of flooding, these can be more or less easy for you or your clients to understand.
When reporting the results of any flood search to your client, you should tell them that you are not qualified to advise on technical matters regarding the results and that they should raise any questions they have with either their surveyor or the consultant who prepared the report.
A general environmental search may provide some limited information about flood risk, but commercial search providers are increasingly providing dedicated flood searches and reports.
You should consider the terms and conditions on which the search or report is provided, including any limits on the liability of the provider.
Generally, searches or reports for commercial property can be tailored for the property and its use, or proposed use, and will be more detailed than for residential property.
5. Enquiries of the seller, landlord and borrower
Enquiries about flooding should be raised with the seller, landlord or borrower as appropriate as part of the pre-contract enquiries.
Enquiries of the seller, landlord and borrower are particularly valuable in eliciting information about flooding or the causes of flooding that is not revealed by other searches and investigations. For example this is a way of obtaining information about localised private drainage failure.
You should not rely solely on replies given to enquiries about flood, environmental or other physical issues in respect of the property. The answers provided may indicate the need for:
- further enquiries
- further investigations, or
- further information.
5.1 Residential properties
The Law Society Property Information Form (TA6) asks for details of any flooding that may have affected the property.
5.2 Commercial properties
The Commercial Property Standard Enquiries Form (CPSE 1) requires the seller to provide details of any flooding of which it is aware and asks whether the seller has had any difficulty in obtaining insurance at normal rates, excesses and exclusions.
6 Physical inspection, survey and valuation
6.1 General valuations and surveys
Lenders will usually have a valuation carried out. Commercial clients may commission their own survey report. Residential clients may commission a homebuyers report or structural survey. These valuations and surveys may provide information about potential flood risk.
The Law Society Conveyancing Protocol (at Stage A step 5 and at Stage B step 19) says that when acting for the buyer you should discuss the advisability of having a survey carried out and suggest that the buyer consult an independent surveyor for advice on valuation and survey.
6.2 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:
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.
7 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 and rent may not be suspended, depending on the wording of the lease.
The Law Society Standard Conditions of Sale (fifth edition) and the Law Society's Standard Commercial Property Conditions of Sale (second edition) oblige the buyer to assume the risk from exchange of contracts.
You should discuss responsibility for insuring the property, and the point at which insurance should commence (for example from exchange of contracts), with the buyer or tenant if appropriate..
You should consider advising the buyer to investigate the terms on which buildings insurance is available for all risks, including flood, prior to being contractually committed to the purchase or other transaction.
The Law Society Conveyancing Protocol states that you should suggest that buyers investigate the buildings insurance position at an early stage in the transaction and in any case in advance of exchange of contracts.
Making investigations of a number of insurers may indicate whether the property is at risk (Stage A, step7 and Stage C, step 46 of the Protocol).
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.
8 More information
8.1 Law Society products
8.2 Law Society services