Navigating Climate Risks in Property Transactions

Earlier this year, the Law Society released its climate change guidance for the legal industry. With it came the need for climate risks to now be highlighted to property buyers as part of the conveyancing process.

The Conveyancing Information Executive (CIE) has welcomed the guidance which aims to make property buyers more aware of potential climate change physical risks – such as flooding, ground stability and coastal erosion – and their impact on the properties they are looking to buy. The CIE has called the Law Society guidance “essential reading”.

The guidance encourages conveyancers to take a more proactive stance in identifying and highlighting climate legal risks as part of their client legal advice. The guidance is understood to be the first of its kind in the world. The CIE meanwhile, is the first industry body to provide regulation in the form of a climate change report compliance note which governs the data, modelling, coverage and reporting within member searches.

The impact of extreme weather events 

Climate change is having an increasing impact on property purchases. The Law Society points out that extreme weather events such as storms, floods, droughts and heatwaves and the fact that they are becoming more prevalent, poses risks to both commercial and residential properties as well as transport infrastructure and business operations.

It points out, for example, that spells of extreme heat and prolonged drought have led to a sharp rise in subsidence claims recently – particularly in 2018 and 2022. A scenario model by the Nationwide Building Society predicts this pattern will continue. “The model assumes that surge years for subsidence, flooding and storms will continue, with the frequency likely to increase and insurance claims growing in amount and number.”

This affects asset resilience, value and insurability and therefore has a direct impact on conveyancing transactions, the Law Society says.

Under their duty to warn clients about potential risks, the Law Society suggests that conveyancers include a climate search to highlight the impact of possible climate-related scenarios, such as if the property is on a flood plain which could therefore increase flood risk. The results of such a climate search then need to be reviewed, potential implications discussed and a conversation about how that might affect future ambitions for that property needs to take place with potential buyers.

Using specialist expertise where required

The Law Society also points out that where physical risks of climate change are outside a conveyancer’s knowledge or qualification, then additional specialist expertise should be sought. It also encourages professional development and training to improve such knowledge.

Those who embrace climate risk advice in their practices will be better positioned for a future in which climate change risk is going to escalate. To help further, sector-specific guidance is awaited from the Law Society that will explain more about how solicitors should advise clients on climate change legal risks.