Flood risk alert for future home owners and coveyancers

Buying a property that may be within the range of a flood plain has become even riskier due to the news that around 200,000 homes at risk from flooding could face problems getting insurance from next year.

Properties that have a 75% chance of flooding in any one year are those most at risk. Boston and Skegness in Lincolnshire is the constituency with the most homes at significant risk of  flooding with 7,550 properties under threat, followed by the Vale of Clwyd (7,339 homes), Folkestone and Hythe (7,196), and Windsor (7,125). Some properties in Great Yarmouth also fall into this category.

The reason for this is that an existing deal with the Government expires in 2013 and time is running out for ongoing talks about a new safety net arrangement.

The Association of British Insurers’ director-general Otto Thoresen said: "Insurers want to make sure that every home has access to affordable insurance, should the worst happen, and we're concerned that those people most at risk will lose out unless the Government considers a safety net.

"We are frustrated with the progress of our talks with the Government on this issue and want it to look urgently at a model that would allow flood cover to remain widely available and competitively priced. No country in the world has an entirely free market providing universal affordable flood insurance, and action is needed now to avoid 200,000 high-risk homes struggling to afford cover."

The possible non - availability of insurance may make it more difficult for people to find a mortgage for properties in the affected area and may lead to current home owners in those areas feeling trapped. 

Those acting for prospective owners of such property need to keep a close eye on this development and to warn clients of the what is happening and how this could affect the future value of the property.    Looking more closely at environmental reports and assessing the risk of flooding will clearly be needed as will the requirement to report the risk if indentified to the lender.

Unless Government acts quickly to extend the current arrangement we could see a large number of transactions failing over the next 12 months. 

By David Pett Solicitor and Partner

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

PI Insurers pose greater risk to conveyancers than new SRA proposals?

There are changes afoot with the Solicitor Regulatory Authority’s plans for conveyancing firms.  During the course of the year the SRA will be carrying out a major review of the regulation of Solicitors undertaking conveyancing and the holding of client money because of the risks posed by a small number of firms engaged in property-related fraud and money laundering.

The thrust of the proposals is to ensure conveyancing firms take seriously the risks and establish good compliance and risk management systems.  I am sure that those firms who take conveyancing seriously will already be taking these risk seriously of not by choice by reason of pressure from their PI insurers.

The Strategy is due to be published in October and will operate alongside the Enforcement Strategy published on 13^th January 2011. It will set out how the SRA will engage with firms to ensure that the procedures etc comply with the Principles, achievement of the Outcomes in the new SRA Code of conduct and compliance with the new Handbook.

So why is there a need for a strategy?  Well believe it or not but Conveyancing claims represent about 50% of the value of professional negligence claims. Payments made by the fund have more than doubled over the last few years, tying in with the downturn in the property market.

So how will the SRA will engage with the profession and other stakeholders to ensure it gets the approach to the risks posed by conveyancing correct?   We are told The SRA will draw on the information and experience available (through the Law Society), clients (including lenders) and insurers.

If issues are identified the SRA will work with firms to put matters right and it suggested enforcement action will be a last resort.  The Strategy indentifies the issues that the SRA will be looking to identify and which include:

• Conflicts of Interest

• Referral Arrangements

• Costs Information (including publicity about fees)

• Financial Stability

• Property Related Fraud and Money Laundering

• Acting for Buyer and Seller

• Acting for two Buyers in a Contract Race

• Acting for a Buyer and Lender where the Lender asks a firm to go beyond standard Instructions

• The potential Conflict between duty of disclosure and duty of confidentiality when acting for Buyer and Lender

Firms will be expected to assess these and other conflict risks, and ensure that the systems are in place to identify and mitigate the risks.

The Firm’s referral arrangements will also be under scrutiny. We will be expected to assess these and other referral risks, and ensure systems are in place to identify and mitigate the risks presented by the following:

·       Valuable referral arrangements could compromise a firm’s integrity, professional judgement or independence.

·       Reliance on one-third party for a high proportion of conveyancing work could impact upon its financial stability.

The provision of cost information is another high profile area of the Strategy. Firms will need to ensure that their fees and costs are fairly expressed and not misleading.

Concerned about how financial instability could make firms more venerable to inappropriate pressures the Strategy will be focusing on the identification of firms who only do conveyancing or a significant part of their income is as a result of doing conveyancing.  These firms will need to consider what systems and controls to put in place for monitoring their financial stability and economic viability.

The Strategy will also take the opportunity to review the risks associated with property related fraud and money laundering because a large proportion of the value of payments from the Compensation Fund represents payments related to fraud in connection with conveyancing.

Firms will need to determine what policies, procedures, systems and controls they should put in place to minimise the possibility of being targeted for criminal activity. Again this seem to be re-emphasising the risks and need for processes that we have all had to live with and act upon for some time now.  I question whether there is anything new here.

So what tools will the SRA use to indentify these risks? The SRA will use a variety of strategies and tools to test the systems and controls firms put in place to address the risks they face.

The systems and controls will differ depending on:

• The size and complexity of the firm

• The nature of the conveyancing work undertaken (e.g. e-conveyancing)

• The firm’s client base (e.g. are clients local or national)

The tools and powers will include:

• Desk-based reviews

• On-site visits, including interviews

• Use of formal investigative powers, including requests for documentation and attendance of individuals at formal interview

• Obtaining documents or information from third parties, including law enforcement agencies

• Mystery shopping

• Thematic visits

The SRA has produced a transition manual “OFR at a glance http://www.sra.org.uk/solicitors/handbook/ofr-quick-guide.page. It contains Q & As on ethical dilemmas etc. It is not intended to replace or be a substitute for firms’ own internal procedures.

Overall there is not very much new within this consultation document; much of what is proposed reflects the risk assessment that many of us are now required to undertake as part and parcel of our PI insurance application.  At the end of the day it’s the PI insurers who hold all the cards and who will clearly irrespective of the SRA’s moves  determine the fate of many conveyancing practices.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk

Two thirds of conservatories built require planning permission - conveyancers beware!

One of the most contentious areas of conveyancing concerns planning permission and building regulations or rather the lack of them, in relation to the erection of a conservatory.    

A large number of properties when sold include a conservatory and one that was probably built within the past 10 years.  Not many people when erecting a conservatory consider planning and building regulations, mainly because they rely on the suppliers to advise. Consequently there exist a large number of conservatories that have been built in contravention of planning and or building regulations.

So what should you consider when building a conservatory.   The first step to take is to contact the local planning department and provide them with the dimensions and other design aspects and seek guidance.  Try also the following website:

http://www.planningportal.gov.uk/permission/commonprojects/conservatories/

Don’t rely on your supplier as some are only concerned with taking your money!

In the hope it will help here are some pointers:

Building Regulations

Normally, to be exempt from the regulations the conservatory will need to meet the following criteria:

Built at ground level

Be less than 30 square metres in floor area

At least 50% of area that will form the external boundary / edge of the conservatory must be glazed and 75% of the roof area to be covered with either glass or polycarbonate

Must be separated from the house by an external quality door, patio door or French doors.

There should be an independent heating system with separate temperature and on/off controls

Glazing and the electrical installation must comply with IEE and building regulations

Even if the conservatory is exempt any structural opening created to link the house to the conservatory will require building regulation approval.

Planning Permission

Around two thirds of all conservatories require planning permission.

Under present legislation (and it may change soon ) normally you will not require planning permission if you meet with the following conditions:

It (and other buildings if any ) covers less than 50% of the garden surrounding the dwelling and permitted development has not been removed

It does no face any road

It is not 20m or less from a road or public footpath.

If built within 2m of the boundary line the highest point at that junction is no higher than 4m

Its depth on a detached property is no more than 4000 mm

Its depth on a semi-detached property is no more than 3000 mm

The maximum height is no more than 4000 mm

If built to the side elevation of a property it is no more than 4000 metres high and no more than 50% that of the original house

At least 50% of area that will form the external boundary / edge of the conservatory must be glazed and 75% of the roof area to be covered with either glass or polycarbonate.

Conservatories on listed building, national parks, Broads Areas of Outstanding Natural Beauty, conservation areas and World Heritage Sites will require permission

If in any doubt as mentioned contact your local planning department.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at davidpett@m-j-p.co.uk