Open Letter to the President of the Law Society - Conveyancing Fees

Open Letter to the President of the Law Society - Chancery Lane, London

Dear Sir,

I am a practitioner who manages a practice which provides residential conveyancing services to clients nationwide.  

I have over the past 5 years worked hard to introduce efficiencies as well as measures to combat the increasing risks which continue to arise.  Much of the work has centred around the development of an ‘in house’ risk and case management system.  I along with my co-directors have invested a large amount of time and money to ensure we have a business which can compete with larger conveyancing practices and which more importantly can offer our clients a safe and efficient service.  It has not been easy and apart from an understanding Bank we have had no help or support whatsoever  from the Law Society or any other body.  

Instead we have had to adjust and  show complete flexibility to accommodate the ever increasing flow of regulatory and compliance hurdles thrown our way.   As conveyancers we are required to fund not only our own overheads but also the cost of money laundering checks and the long list of statutory and  other compliance requirements.  Indeed we have had to employ one person who spends all of her time watching out for changes and making sure these are applied within our practices. Tracking as we do the number of hours we spend on each type of transaction it is clear that the hourly rate we receive from providing a good and reliable service is barely above that paid to our office cleaner! 

It never gets any easier, and indeed  if there is at the end of the day any profit left  within a conveyancing transaction it is almost lost in discharging these obligations and taking out PII insurance.  The  financial pressure this imposes is highlighted in a an article which appears on your Small Firms Division website written by Mark Carver : ‘Conveyancing - is the reward worth the risk?’

In this article  Mr Caver makes the following salient observations:

‘In real terms, solicitors are earning less now than they did 10 years ago from conveyancing, with average fees increasing by 36.5 per cent – significantly less than standard inflation for the same period (40.63 per cent). This is in stark contrast to estate agents, who have clearly benefited from the increase in property prices as their earnings are linked to the sale price, and to a lesser extent, surveyors, whose fees have increased above the level of inflation’

‘Not only are solicitors getting paid less for conveyancing than in 2004, but the potential risk is significantly higher, driven primarily by an increase in property prices’

‘Even firms fortunate enough not to experience a conveyancing claim should be aware that approximately £100 of an average conveyancing fee will contribute towards professional indemnity insurance premium for the transaction’.

These are findings which do not come as a surprise but are still nonetheless alarming and must on any interpretation be viewed as a stern warning.   Unless something is done, and done soon, to address the imbalance between fee income and the increasing risk,  high street conveyancers like ourselves will, despite our efforts, be condemned to history. 

Its shocking that through inactivity and unnecessary distraction in projects like Veyo the Law Society has allowed this situation to continue  unaddressed for so long.   The time has now come for action to be taken to reverse this trend and to make sure that conveyancing is not seen as a worthless and inferior profession.  

So some questions for you to answer please.

How much has the Law Society invested in Veyo?

Was any thought given at the time Veyo was conceived about spending the money on forming a strategy to  see how the difference in value attached to the fees of a professional conveyancer and those of estate agent and other  property professionals could be addressed? 

Why is that as a profession  our indemnity insurance is one of the highest when compared to other professionals?

Do you consider  the Law Society has discharged its duty to its members by failing to protect its members who undertake conveyancing  from suffering a severe erosion in the level of their fees at a time when the burden of compliance and other risk management has increased substantially?

Finally, what do you intend to do to make sure action is taken to address this concern?

Yours, 

Additional Enquiries - A Room 101 Opportunity

Do conveyancers  agree that the type of reply shown below should be sent in a concerted effort to bring an early end the growing practice adopted by many conveyancers out there who take great delight in raising copious and unnecessary additional enquiries?:

'Dear Sirs 

Thank you for your long list of additional enquiries. 

We do understand the principle of caveat emptor and the need for due diligence. However the Protocol as you know has made it very clear that solicitors should resist the urge of raising unnecessary enquires.  

Paragraph 32 of the Law Society Conveyancing Protocol states as you know that the buyer's solicitor should: 

'Resist raising any additional enquiries, including those about the state and condition of the building, that have answers which are capable of being ascertained by the buyer's own enquiries, survey or personal inspection. Such enquiries should not usually be raised. Indiscriminate use of 'standard' additional enquiries may constitute a breach of this Protocol. If such enquiries are submitted, the seller's solicitor is under no obligation to deal with them. Nor does the seller's solicitor need to obtain the seller's answers to any enquiries seeking opinion rather than fact'

Noting than many of the enquiries you have raised fall within the category mentioned above could we please ask you to review the enquiries raised and send back to us only those which could be objectively considered as necessary. 

Please keep in mind that we are keen to assist and do not wish to do anything which could delay the progression of the transaction. Indeed it because of this that our request for a smaller but more relevant list of additional enquiries is produced. 

MJP Conveyancing 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

Lender's Certificate of Title

When a client is reliant on a mortgage to fund their purchase of a property, there are certain requirements which a Solicitor must meet before they are able to request the mortgage advance from the lender in anticipation of completion. Solicitors request mortgage monies from the lender by submitting a form known as the Certificate of Title – COT for short; this article provides a guide of the process leading up to, and including, completion.

Before your Solicitor is able to submit the Certificate of Title, the Solicitor must ensure that all outstanding matters have been resolved, as, by submitting this request, the Solicitors is providing their confirmation to the lender that they have complied with, and satisfied, their requirements as outlined in the Council of Mortgage Lenders Handbook – the CML. A Solicitor must be able confirm the property has a good marketable title.  Such matters include, but are not limited to, the following:

Ø  ID checks have been carried out

Ø  Any potential gift elements connected to the transaction have been considered and acted on appropriately

Ø  All enquiries with the seller’s solicitors have been resolved to a satisfactory standard

Ø  All search results have been returned, reviewed and are clear of issues.

Ø  The valuation report has been considered and is clear

Ø  Client’s details, the purchase price and property details concord with the mortgage offer. Also, any special conditions attached to the mortgage offer have been considered.

Ø  Any prejudicial issues affecting the valuation of the property must have also been reported to the lender during the course of the transaction and resolved.

Ø  Confirmation that there are no onerous covenants or lack of rights of access or services to the property.

Once the above conditions have been satisfied, a transaction is able to proceed to exchange and completion, for which, a Solicitor will require a signed Contract and Transfer Form (though the latter is needed for completion more than at the point of exchange), confirmation that the client has approved the completion statement, an agreed completion date, deposit funds and confirmation that buildings insurance is in place.

It is important to note that standard practice usually dictates that 10% of the purchase price of the property acts as a deposit on exchange; furthermore, a Solicitor will require buildings insurance to be in place before they are able to proceed to exchange of Contracts – your insurance cover note should have your lender noted as an interested party.

Each lender will require a period of notice from receiving the certificate of title to releasing the funds which can be up to 10 working days (although usually 5 working days). This can sometimes lead to a delay in the exchange process as if a Solicitor is giving the lender less than their required period of notice they will need to obtain written confirmation from the lender that the mortgage advance will be released on the date of completion before committing you to exchange Contracts.

It is important to note that your Solicitor is only able to release the mortgage funds on the completion date if they hold sufficient funds to complete the purchase of the property, pay all stamp duty land tax and registration fees. This will mean that although after completion your Solicitor has 30 days to submit to the Inland Revenue the duty payable they will require you prior to completion to ensure they would sufficient cleared funds to enable them to do so. 

Article written by Charlotte Ribbons Trainee Solicitor 

MJP Conveyancing are solicitors who provide residential conveyancing 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

A Watertight Approach to Flood Insurance

With the Environment Agency citing that one in six homes in England are at risk from various forms of flooding, flood insurance has become a much debated topic of late. 

In the third of a series of articles penned by trainees of MJP Conveyancing as apart of the Company's ongoing training programme, Beth Slaughter writes:

Whilst Britain was battered by strong storms earlier this year, the conveyancing industry became inundated with concerns over the availability and affordability of flood insurance for homeowners. With the Water Bill currently passing through Parliament, this article indulges the national obsession with the weather, analysing the current political position as to flood insurance in relation to leasehold property, as well as what issues a potential purchaser of a leasehold property should be wary of when entering the leasehold property market.

Until June 2013, there existed an agreement between the UK government and the insurance industry which permitted individuals to obtain flood risk insurance for their properties even though they might be located in a high risk area and, in exchange, the government promised to maintain its spending on flood defences. This ‘Statement of Principles’ was only ever intended to be a temporary measure and has been criticised for its restriction of customer choice – insurers are only committed to their existing customers and new insurers can decide to whom to offer flood insurance and, additionally, the Statement does not guarantee affordable insurance premiums or manageable excesses for homeowners. The Water Bill Act 2014 has posed an opportunity for the government to turn the tide on the current approach to flood insurance, ensuring that it remains widely affordable and available – this is manifest in their Flood Re proposal, which is due to come into force in 2015. In essence, Flood Re provides that all buildings insurance will carry a levy that will be used to subsidise flood claims from high-risk households, thus reducing the premiums homeowners have to pay. Unfortunately, as currently defined, Flood Re will exclude buildings cover for flood insurance within a variety of sectors including council homes, the private rented sector, and, notably, leasehold properties.

With respect to leasehold properties, it is usually the responsibility of the Freeholder – or Management Company – to insure the building; they, in turn, pass this cost on to the leaseholder through their management charges. Insurance providers thus dub leasehold property to be ‘non-domestic’ and protection under the Flood Re scheme as it currently stands would be void. It has been argued that the decision to exclude leasehold property from Flood Re is politically motivated, as it prevents homeowners subsiding businesses, however, this is a fallacy, as it is the leaseholder themselves that would ultimately suffer. Ironically, the ‘floodgates’ argument has also been cited as a reason for the narrow delineation of property in Flood Re, as expanding the scope of the government’s proposals would push up the levy on all households; as a spokesman for the Association of British Insurers states: ‘Excluded properties should still get insurance, it’s just the cost won’t be capped. Flood Re is designed to focus on areas where the lack of affordable and available cover is most acute. We have to draw the line somewhere’. Both the British Property Federation (BPF) and the Council of Mortgage Lenders (CML) strongly oppose Flood Re as currently defined; the Director General of the CML note that they ‘find it difficult to believe that the original policy intention was to exclude a whole swathe of residential property from the stated aim of ensuring that affordable flood insurance continued to be available across the market’.  

The potential purchaser of a leasehold property has much to consider in respect of flood risk insurance. Under the Law Society regulations, when buying a property a Conveyancer should make the client aware of the potential flood risk to some properties; though conveyancers cannot compel a client to carry out an environmental search and a flood search, these are strongly recommended. Purchasers should note that their legal advisors can report to them on the search results, but cannot comment on any specialist issues which arise in the search – such concerns should be referred to a surveyor. Further information regarding the prevalence of flooding in any given area can also be obtained free-of-charge on the Flood Agency website – http://www.environment-agency.gov.uk/homeandleisure/floods/  - however, visitors to this site should note that it only records flooding in relation to river or sea level changes, and does not provide information about a specific property, whereas specific searches draw on more detailed data. It is for these limitations that purchasers should not solely rely on this website.  

As aforementioned, it is usually the case with leasehold properties that the Freeholder – or Managing Agent – arrange the insurance policy for the building. Purchasers should request a copy of the insurance policy and provide the same to a specialist broker who will be able to advise them as to the adequacy of the cover. Caution should be taken that the policy is sufficient for the particular building in question, incorporating both the internal and external elements of the building. Insurance might notionally cover a building for flood damage, but with heavy caveats – excesses may be large and there may be particular exclusions. Indeed, if flooding becomes an uninsured risk, the leaseholder may be liable to make good any damage depending on the wording of the lease.

Finally, as the CML demands flood insurance as standard, considerable increases in insurance premiums and excesses could affect the affordability – and even viability – of mortgages. The Law Society notes that lenders are increasingly likely to investigate the flood risk of a property when undertaking a valuation and may impose requirements on the mortgagee as a result of their findings. Difficulties in obtaining mortgages and insurance may impact of the saleability of leasehold properties, reducing the number of potential purchasers and purchase price alike. 

Purchasers should consider that if a property is in a high risk flood zone, it does not necessarily that they should not purchase the property; the purchase price could be re-negotiated to allow monies to be invested in flood resistance measures on the property, such as non-returning valves and self-raising barriers.

 With an estimated five million leasehold properties in England and Wales and approximately 840,000 thought to be at risk of flooding, issues surrounding the accessibility and affordability of flood insurance is no small matter. As Ian Fletcher, the Director of Policy at BPF, notes: ‘every property that is occupied is somebody’s home and investment. Flood doesn’t discriminate between freehold and leasehold…and it is of small comfort having contents cover if the building itself is left uninhabitable’. Perhaps the Government will rescue thousands of leaseholders in an eleventh hour amendment to the Water Bill; if not, individuals are best to err on the side of caution when buying leasehold property so that they are not submerged under spiralling insurance premiums.

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

The death of simultaneous exchange and completion?

The time between exchange and completion has shortened considerably and more and more transactions are concluded through  simultaneous exchange of contracts and completion.

The recent Court of Appeal decision in Santander v R. A. Legal Solicitors has cast serious doubt on whether this practice is exposing conveyancing solicitors to the possibility of a breach of trust claim

The decision at first instance in Santander v R. A. Legal Solicitors  [2013] EWHC 1380 (QB)  confirmed and clarified the Court of Appeal's decision in Nationwide v Davison’s [2012] EWCA Civ 1626 as to when solicitors should be relieved from the consequences of their breach of trust.

The facts are as follows.  R A Legal Solicitors had acted for the purchaser of a property, for which Santander’s predecessor, Abbey National, had made mortgage funds available to the buyers solicitors to facility the buyers purchase.

Unknown to the buyer’s solicitors, those solicitors acting for the seller had been acting dishonestly, and the buyers solicitors had transferred the purchase sums before a first charge in favour of the lender had been acquired and an existing charge discharged.

The Queen's Bench Division held that, whilst the buyer’s solicitors had acted in breach of trust in releasing the funds advanced, the they were relieved of all liability in respect of that breach since the shortcomings of the solicitors handling in relation to the transaction were not an effective cause of the lender’s loss.

On appeal, the Court of Appeal did not agree and  found in favour of the lender finding:

“The failings of RAL ( buyers solicitors ) formed part of a larger picture of the shoddy performance of a conveyancing transaction from start to finish, which leaves me in no doubt that it would not be fair to excuse the firm from liability, in whole or in part.”

Significantly, and central to the success of the appeal  is the fact the Buyers solicitors  sent an unqualified certificate  of title to Abbey on the 13th July, even though they were waiting to inspect a copy of a 1986 Transfer. Their view was if the Transfer contained anything untoward Abbey’s money could be returned. This was done in order to speed up the eventual process of exchange and completion.

Condemning this practice the Court of Appeal stated:

“The appropriate way of dealing with delays is to persuade lenders to move faster or remit the funds to be held to order in advance of an unqualified CoT. To my mind the pretense that the investigation of title has been completed when it has not is a method of dealing with that difficulty which borders on dishonesty. The submission that unqualified CoTs are given frequently prematurely makes this misconduct all the more serious.”

This was one of many failings on the part of these solicitors and which viewed collectively pointed to a firm who had acted recklessly with the handing of money belonging to a third part to whom the solicitors owed a duty of care.   The other failings included the incomplete submission of requisitions, the submission of the mortgage monies to the seller’s solicitors in the absence of an undertaking to hold the monies to the order of the solicitors, failure to check the replies to requisitions and a total disregard of the completion code.

Rob Hailstone of the BOLD Group which represents a number of conveyancing practices today issued a very helpful note on the lessons to be learned from this decision and which act as a timely reminder to all practitioners to carry out an urgent review of processes.    I have set out these ‘lessons’ below.

More significantly however are the questions this decision leaves unanswered relating to the duty of care owed to a lender in circumstances where a simultaneous exchange and completion take place. 

The questions are as follows:

Is there a breach of our obligation to the lender to submit a COT in circumstances where we have certified that we are satisfied there is a good and marketable tile, but we have yet to exchange contracts?  Or putting it another way, should we only ever submit a COT once exchange has taken place?

If  a COT can be submitted before exchange, is it permissible given the CoA ruling to send mortgage funds over to the sellers lawyers (after making checks on the solicitors and checking carefully replies to requisitions) in readiness for completion providing we have a full and satisfactory undertaking from the sellers solicitors to hold the monies strictly to our order?

If is not then does it follow that simultaneous exchanges and completions on mortgage related transactions should no longer take place?

Here are Rob’s tips (rh@boldgroup.co.uk)

·         Raise your requisitions making sure that all relevant questions have been specifically highlighted and asked

·         Make sure that the replies to requisitions correspond to the correct questions, are specific, detailed and accurate

·         Do not submit your CoT until all title investigations have been completed to your satisfaction

·         Do not hold on to the mortgage advance if completion is delayed, without consent from the lender

·         Make sure that the Completion Code applies and it has been formally agreed to Complete by Post

·         Make sure that you receive all outstanding documentation by post immediately after completion, including any undertaking or form of discharge

·         Take correct and swift action if completion does not take place, outstanding documents are not received and/or vacant possession is not granted

·         In an ideal world (the judges seem to think we work and live in one), do not submit a CoT until exchange has taken place and do not agree a completion date that is less than five working days from exchange. Maybe we should get lenders to stipulate that this has to occur, thereby eliminating the dangerous and stressful practice of simultaneous exchange and completion?

Confusion around liability for church repairs continues

October of this year saw the introduction of new rules on Chancel repair liability.

This is the liability of an owner of land to pay for repairs to the chancel of a parish church. Owners affected include individual homeowners as well as ecclesiastical organisations, universities, colleges and others. Land does not have to be near a church building in order to be liable.

The amount of this liability can often be significant and  therefore this is an issue which you must ensure your legal advisor addresses when purchasing or remortgaging your home. 

Prior to the change of law introduced in October this liability if it existed in an area including the property you were purchasing or remortgaging  you would be exposed to a demand whether or not you were ware of its existence.   For this reason a competent property lawyer would carry out a search to see if the  liability existed and if it did to take out insurance to protect you if a claim was brought. 

Since the 13th October the liability will, in general terms, only be binding on you if the person or body who has the right to make the claim has registered the liability with the Land Registry.  In other words, you would only be exposed to the liability if notice of the existence  is shown in the title document of the property to be purchased or remortgaged.  

I say this is the general rule but there are situations when even if the liability was not registered  prior to the 13th October at the Land Registry it may still be binding on you. 

Registered land

For registered land, where a notice has not been entered, liability for chancel repair will continue until the first transaction for value is registered at the Land Registry (not a dealing at nominal value or a gift or transfer on inheritance) after 13 October 2013.

This means if the right to claim for the cost of church repairs was not registered with the Land Registry by the 13th October, it could still be binding on you when purchasing a property after that date. If you are purchasing a property after the 13th October and there have been no change of ownership in the interim it is important to check the Land Registry register for any notice of chancel liability which may have been registered before you exchange contracts and to also ensure your solicitor takes steps with the Land Registry to provide you with a protection period between exchange of contracts and registration of your ownership with the Land Registry. 

You should also consider taking out protection against the liability if you are remortgaging or gifting property 

Unregistered land

In the case of unregistered land, chancel repair liability will continue to exist in the same way; If any chancel repair liability is not protected by a notice or caution before your ownership is registered, you will take the property free from this liability.

In short when purchasing or remortgaging or gifting a property please ask you solicitor for reassurance that steps to protect you from this liability will be taken. 

MJP Conveyancing 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

CQS and Lender Exchange - Lets keep an open mind

Before we become defensive and begin casting negative thoughts lets wait for the detail to be supplied.   Why do we all  look at  the introduction of new systems as an attack on our profession?  We should  for the moment keep an open mind, writes David Pett, Director of MJP Conveyancing Limited. 

My thoughts in the meantime are as follows:

A platform of this type was inevitable and if it is introduced properly can only serve as an effective means of combating fraud and ensuring consistency on lender panel criteria.   The sooner the profession comes to terms with the fact that conveyancing is there for the serious players and not the ‘dabblers’ the better it will be for us all.  Why should we not accept with open arms a system which will allow us to apply to join all panels with one application and hopefully one fee?   Why not allow a system to operate which will ensure consistency in application of anti fraud and money laundering measures?  The Santander portal should demonstrate to us all that  lenders are entitled to be stringent in their vetting and control over firms who handle their money.  I am shocked by the level of contribution to the solicitor indemnity fund which we are expected to make this year.  We should all be asking ourselves why is so high and what is being done to ensure that those who do not have correct and effective systems and processes in place are not allowed to practice in property law.

Surely a portal of this type must be a more attractive option than separate representation.   If firms can not get onto the panel of lenders then there must I agree be good reason for this and if there is then we should respect that.  Looking at the Land Registry Data there are literally thousands of firms who only undertake a few completions each month - is it completely unthinkable that these firms should be excluded from lender panels?

As for the Law Society Portal do we need this, surely the money would be better spent promoting CQS firms to the public and looking at ways of changing and improving our archaic system for conveying property.  Why spend money building a system when the current system as we all know does not work!   Madness. Why also waste time and money building a system when the national protocol around which it will be built is not compulsory.   What happens when one firm who has bought into the portal deals with a firm which has not or where there is chain and one firm is sitting outside the portal?

Why also add costs to the process when most firms who take conveyancing seriously already have sophisticated case management systems? These systems will need to be adapted and integrated so as to avoid duplication  - yet more cost which we could do without. 

At the end of the day we all know that whatever the Law Society touches turns to dust as the Law Society’s HIP offering clearly demonstrated.  Do we therefore need to worry or be pro active in our response to their proposals?   They approved a contractor without consultation with members and are now determined to waste our money on a scheme which has ‘doom’ written all over it. 

I hope I am proved wrong. 

Will the Mortgage Guarantee Scheme trigger a 'Boom and Bust' legacy for the Conservative Party?

The mortgage guarantee scheme is designed to help first-time buyers and existing property owners move up the housing ladder providing borrowers with a 5% deposit the opportunity to buy property worth up to £600,000.

The Government will guarantee up to 15% of the loan at a cost to the lender, allowing the borrower to access cheaper mortgage deals.

This differs from the first stage of Help to Buy.   That scheme allows people taking their first step onto the property ladder to borrow up to 20% of the value of a new build home from the Government, interest-free for the first five years.

Borrowers need a 5% deposit and must take out a mortgage to cover the remaining 75% of the cost of the property.

After the five-year interest-free period ends, borrowers will be charged a fee of 1.75% of the loan’s value. This fee will increase every year at 1% above inflation.

These fees only count toward the Government loan and come on top of the mortgage repayments. Borrowers must pay back the equity loan when they sell the home or at the end of the mortgage period - whichever comes first.

The mortgage guarantee scheme  - Help to Buy 2 - is available to both first-time buyers and existing homeowners buying new build and older properties.

Borrowers will need a 5% deposit, while the lender will be able to buy a guarantee from the Government covering up to 15% of the value of the property.

Both phases of the scheme are available on properties worth up to £600,000.

So what are the pitfalls?

If house prices fall, hundreds of thousands of buyers on the scheme could be left in negative equity.

If a property is repossessed because of default of the borrower, the Government will guarantee 75% of the part of the loan above 80% of the loan to value. The borrower will meet the other 25%.   If there is insufficient funds to meet the loan the borrower will still be liable to the lender for the whole of the loan even the part guaranteed by the Government.

The other key question is whether mortgages offered through the scheme will actually be any cheaper than those on the market at the moment, and whether enough lenders will take part.

Banks need to pay a charge to have their mortgages guaranteed by the Government, so are likely to build this sum into the total cost of the loan.  It is likely that a sum equivalent to 1% of the value of the property is to be placed into a reserve to cover defaulters.  The cost of this will be passed onto the borrower.

Are these schemes the real solution to Britain’s housing crisis?  Will they not keep house prices artificially high, giving people no choice but to take out large loans that could run out of control if interest rates rise?

Cambridge University study found last year that although shared ownership schemes allow them to buy their first home, they do nothing to help them buy their next home.

Cynics will say all of this amounts to nothing other than political engineering reminiscent of the type of policy that led to the ‘boom and bust’ years.  Ironic in some way given this is a Conservative policy.     We will just need to see what time brings. 

MJP Conveyancing  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

Property Law Implications of Fracking

What is Fracking?

It is a process whereby natural gas is extracted from beneath the earth though hydraulic fracturing.  It is not a new process; it has taken place in this country for many years now. 

This type of mining has in the United States led to a substantial reduction in the price of gas for industry and consumer – a reduction of around a third. The Government is hoping for a similar result in the UK  given the existence of massive reserves of shale gas.

There is no legal framework for governing Fracking within the UK. The Government hopes the current safeguards built within environmental and planning law will be sufficient to protect the environment and communities.

So who owns the shale gas? 

In the US it belongs to the landowner whereas in the UK the Crown owns it (Petroleum Act 1988).  So there is unlikely to be Dallas like windfalls on offer.

However to mine the gas the contractor still needs the consent and the cooperation of the landowner to be able to drill down for the extraction to take place. If the drilling company proceeds without their consent and co-operation, it could face delays in starting or continuing to drill or it could find itself unable to drill or continue drilling at all. One project could given the horizontal drilling involve a multiple of landowners as the local authority and the regulators.

Can a landowner claim compensation?

A Government licence is needed to extract it. The licence holder can obtain ancillary rights under the Mines (Working Facilities and Support) Act 1966 - for example, to occupy land, to obtain a water supply, to dispose of effluent, to erect buildings and to lay pipes. The court will grant such rights if it is not possible to agree terms with the Landowner.

Compensation and costs can be sought from the contractor and if necessary awarded by the Court though the measure of that compensation will be based not on the value of the extraction by the contractor but rather the financial loss the landowner will suffer by not having the land available to use.

Common Law and Statute therefore offer protection to the landowner and financial recompense as well as costs will be available.  How the law dovetails with the owners of mineral rights (which need to be registered at the Land Registry by 12 October 2013) and the rights of adjoining land whose land the process may damage/disturb remains to be seen.

MJP Conveyancing  - David Pett

Flash Flooding Risk - Ignore it at your peril

Are solicitors and those working with property doing enough to protect homebuyers?

Most solicitors will obtain an environmental search result and this will disclose whether the property to be purchased is close to or within a flood plain. But however many of those solicitors actually check to see whether the result includes areas where over the past ten years land and property has suffered damage from pluvial or flash flooding?

Flooding is probably the most significant natural hazard we face in the UK and around 2.8 million people are at risk from pluvial, or rain related, flooding, which represents around one- third of all flood risk in the UK. This figure could increase by 1.2m by 2050 due to a combination of climate change and population change. Population change has the potential to put three times more people at risk than climate change.

Since 2000, insurers have paid out £4.5 billion to customers whose homes or businesses have been hit by flooding. The 2007 summer floods were responsible for £3 billion of payments alone. It is estimated that the total value of assets under flood risk is more than £200 billion.

Pluvial flooding occurs when an extremely heavy downpour of rain saturates the urban drainage system and the excess water cannot be absorbed. This can occur without warning and in the worst cases, such as happened in Glasgow, York and Hull can cause huge destruction.

So what does this mean for the homeowner?

Increased Premiums

To begin with those in affected areas are likely to see increase in premiums and others continue to remain at risk of being priced out of insurance in twelve months’ time.

Possible non-availability of insurance

The ABI and the Government are still locked in negotiations over whether the insurance industry should continue to guarantee insurance for those who live in high-risk areas.

Without a new approach, the ABI estimates that up to 200,000 property owners will struggle to get affordable flood insurance when the current agreement with the Government ends in June 2013.

Possible non-availability of mortgages

The Council of Mortgage Lenders warned that the “big and significant issue” surrounding the potential lack of flood insurance would inevitably impact upon the housing market.  Significant increases in premiums or excesses "could compromise the affordability of the mortgages" and make it harder for the homeowner to find a mortgage. 



Possibly left with an ‘unsalable’ Property

Realistically if a property has been flooded in the past it is unlikely that someone will be interested in taking the property on particularly when there is a risk insurance cover could be expensive or possibly unavailable.  You also need to ask would you want to be living in a property when there is a risk that your home could be affected by flooding?

So this brings me back to where I started, are lawyers doing enough to protect clients from these possible consequences?  As a buyer what should you be looking to do to make sure your lawyer is carrying out checks on flooding?

If you are selling a property that has a flood history then this needs to be disclosed since if you fail to do so and the buyer relies on the representation the transaction could be set aside if the buyer later found out you had misled him.

If you are buying then you should make sure your lawyer carries out an environmental search and that the search result contain information on flash flooding.     If the property is in or close to a flood plain you should always invest in a flood report to obtain greater detail of the flood risk.   Paying £40 for a report is a small price to pay for the comfort of the information it will provide.

Check on Google as to whether there have been any reports of flash flooding in the area.   

Visit the Flood Agency website though make sure any information you rely on includes the risk of flash floods.

Check with your insurer in advance of exchanging contracts to make sure the post code of the property will not lead to you having to pay more for your insurance or whether there is a risk that the property may become uninsurable.

Inspect the property carefully or better still get your surveyor to report to you on whether there is evidence of past flood damage.

The message is that we should all exercise more care when we look at purchasing property to ensure the flood risk is given the priority is clearly warrants.

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