January – that time of year to reflect on the past 12 months and consider what lies ahead in 2013. Whilst I can’t say what the future holds, I believe that three of the key issues facing the market in 2013 will be compliance, flooding and subsidence.
1 January 2013 saw individuals at more than 8,800 firms take up their new roles as Compliance Officers for Legal Practice (COLPs) and Compliance Officers for Finance and Administration (COFAs). This, however, represents less than 90% of the nearly 10,000 firms required to appoint individuals to these roles, leaving nearly 1,000 firms unrepresented.
It’s vital that all required firms comply and nominate a COLP and a COFA; they play a pivotal role in ensuring that firms and ABSs throughout England and Wales have appropriate systems and controls in place to enable them to manage risks to their delivery of competent and ethical legal services. If they do not, they run the risk of their authorisation being revoked and even the closure of their firm.
We continue to work closely with our clients and partners in developing affordable, user-friendly and readily accessible tools which not only assist legal practitioners in managing their compliance requirements, but also help remove the burden. Thanks to our ever-evolving data and reports, solicitors don’t need to be hydrologists or experts in contaminated land to interpret the risks.
2012 started with hose pipe bans and warnings of drought but ended as the wettest in England since records began. It’s been revealed that the UK as a whole has been getting wetter in recent decades, with four of the top five wettest years occurring since 2000.
With the Statement of Principles coming to an end, from 1 July we are entering a new era in which flood insurance may not be affordable or even available to ‘at risk’ homes. The Association of British Insurers (ABI) has devised a workable new way to deliver flood insurance to ‘at risk’ properties by adding a small premium, in the region of £5-£8 per policy, to every household’s flood insurance, including those at ‘low risk’. At the time of writing, however, the Government is yet to accept its proposal. If this solution is not agreed and put in place for 1 July, I anticipate that the ABI will revert to ‘risk-based’ pricing – meaning that those at significant risk of flooding may well find their insurance cover is withdrawn whilst others may see their premiums or excesses significantly increase or that certain conditions are imposed on cover.
Whilst the ABI’s proposal seems the most reasonable way forward at present, it is in no way certain that the Government will agree. After all, why should those in low risk areas pay extra to cover those who have chosen to live in high risk areas? Of course, flood risk data hasn’t always been as readily available as it is now so many people will have unwittingly purchased in a high risk area – particularly if the property is not located near a river or the coast – but that doesn’t mean that others should pick up the bill.
It is – and will continue to be – vital for homeowners to obtain an independent, professional risk assessment on both coastal and flash flooding for their property. It is only when they are in full possession of the facts that they can make an informed and intelligent decision about their next steps, either for a property they already own or are considering purchasing.
For those who already own an ‘at risk’ property’, they shouldn’t think that there is nothing to be done and that they automatically face either hefty insurance payments or clean-up bill. There is a vast array of products out there which help protect properties and mitigate the damage caused by flooding. From door, window and air brick covers to toilet bungs and everything in between, these products will not only help protect a home, but they could make the difference between being able to obtain affordable insurance or not.
It is not only homeowners that need to be aware of the risks in order to cover themselves - conveyancing professionals must ensure they carry out due diligence and recommend their clients obtain a flood report for any property they are considering purchasing or taking a lease of. This will alert them to any potential problems, enabling them to research whether insurance cover will be available and discuss flood resistance or resilience measures at a stage when it is still possible to renegotiate the price.
It is perfectly plausible that, in the not-too-distant future, a situation could arise whereby a homeowner who is flooded twice in short succession simply walks away from the property because they cannot get it insured or repaired. The lender would then repossess the property and either sell it at a huge loss or is unable to sell it at all. They would then call in the legal file and, on finding that no enquiries were made about flood risks and no report was carried out, they would be highly likely to sue the solicitor to recover their losses.
Whilst I’ve not yet learned of this happening, 2013 could be the year that a test case is brought against a conveyancing professional for not carrying out due diligence.
Solicitors need not worry unduly however; they are not required to become hydrologists overnight. Professional desktop searches are readily available, easily accessible and extremely cost-effective, thereby removing the onus from the solicitor to conduct their own extensive research. Professional flood search reports provide not only the homeowner with the information they require, but give solicitors peace of mind that they have carried out their due diligence.
Subsidence is a silent natural disaster and represents the largest ground stability risk in the UK with approximately 6.5 million properties at risk – approximately 1.5 million more than those at risk of flooding. An average estimated £200-£250 million is spent on insurance claims every year, with the total spend for the past 10 years totalling £3bn. Like flooding, subsidence is not going to go away – in fact, European research predicts a more than 50% increase in subsidence over the next 30 years alone.
Despite these concerning figures, thorough checks of a property’s subsidence risk are not always carried out as standard during the conveyancing process; as a result, many homebuyers may be purchasing a property without realising the dangers or understanding the impact upon value, insurability and saleability. The Council of Mortgage Lenders advises conveyancers that they ‘must carry out any other searches which may be appropriate to the particular property, taking into account its locality and other features’.
If homeowners or potential homeowners are unaware of the potential risks to a property, they may be caught off guard with their property exposed to subsidence. The only way to ensure that this does not happen is to be prepared and obtain a professional assessment. This isn’t as onerous as it sounds; help is at hand. We developed our Subsidence Risk Services precisely to remove the burden from solicitors. These go well beyond the current level of information found in standard searches. Together with Property Assure we now have a unique risk-based data set taking into account previous insurance claims. Our subsidence certificate now offers a very straightforward assessment for clients and provides homeowners and solicitors alike with peace of mind that all necessary checks have been carried out and that no hidden surprises will be uncovered once the buyers have moved in.
In the event that a subsidence risk is identified we also provide a full range of comprehensive follow-on services.
Given the number of homes at risk of subsidence, it is vital that homeowners and solicitors alike are aware of the risks and take steps to protect any ‘at risk’ properties. If they do not, there is a very real risk that many homeowners may see their home and financial stability disappear.