13 Jul 2016
Author: Stephen Breen
The legal issues
When you buy a property, your solicitor may recommend an Environmental Search. Occasionally your mortgage lender may insist on a search.
The results of the search will reveal whether there are risks of flooding, contamination or subsidence in the area. It will also reveal if there is radon gas in the area, and if there is a landfill site nearby.
The risk of flooding will usually be assessed as ‘very low’, ‘low’, ‘medium’ or ‘high’. A medium or high risk can lead to a number of difficulties for the buyers. These issues should be tackled before you exchange contracts with the seller.
The issues are as follows:
An Environmental Search is only indicative of the risk of flooding in the area. It is not specific to a particular property. Your solicitor will ask the seller questions about any actual flooding that has occurred at the property. Asking the neighbours can also be helpful in finding out if flooding has been a problem in the past.
It is important to appreciate that your solicitors is not qualified to give advice on flood risk or interpret technical flood reports. If you have found out that the property you intend to buy is in a flood risk area and having made enquiries locally you are still concerned about the risk, you may need to instruct an expert. A valuer, surveyor or specialist flood risk consultant can carry out a physical inspection, survey or valuation for you and provide advice on the risks of flooding. You must carry out any investigations before you exchange contracts.
Problems obtaining a mortgage
Different lenders have different policies regarding lending on properties within a flood risk area. Some lenders may withdraw the mortgage offer as a result of the risk of flooding.
Problems obtaining insurance
Obtaining insurance for a property in an area prone to flooding could be difficult or very expensive. Fortunately, a Government scheme (Flood Re) has addressed this issue for the majority of properties. However, you should contact insurance companies and make enquiries as to the cost and availability of cover before exchanging contracts.
Remember that once you exchange contracts, you will be responsible for insuring the property under the Standard Conditions of Sale and you will need to have insurance in place from the date of exchange.
Difficulty reselling the property
If you decide to sell the property in the future, the fact that the property is in a flood risk area alone may make some buyers hesitant to purchase – even if there has been no actual flooding.
Despite what you might think, flooding has not always had a dramatic effect on house prices historically – according to figures gathered by the BBC. Before Tewkesbury was flooded in 2007, the average property price was £241,821. This fell to £238,200 when the floods hit, and then returned to £240,000 for the rest of the year.
A similar pattern can be seen in Cumbria which was hit by floods in both 2005 and more severely in 2009. In Cockermouth, the average house price was £217,243 before the floods hit in November 2009 – then the price dropped to £213,234. Changes to values since then are in line with changes across the housing market as a whole.
However – the fact that the average selling price was not drastically affected by the flooding in these areas is not an indication of whether saleability was affected. It is also no guarantee that other areas will follow the same pattern.
If the property is on the banks of a river, stream or ditch, your solicitor should make enquiries as to whether there are any rights or duties. Duties include, for example, keeping the banks clear.