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.
Compliance
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.
Flooding
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significant risk of flooding may well find their insurance cover is withdrawn whilst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
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.
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