Climate Change

Lawyers have a duty of care to advise on all risks which affect their client/matter. It can, therefore, impact a wide range of matters, from corporate and commercial to insurance and environmental. However, property matters are likely to be the most affected area.

• For all matters, you need to consider the risks to the client arising from the impact of climate change on that matter. The extent of your duty depends on the nature and sophistication of your client. It will be higher for private clients and lower for experienced commercial clients. The extent of the duty also depends on the likely impact of climate change on the client/matter in question, though this is, of course, a circular concept.
• Best practice, therefore, is to discuss this with the client, note that conversation and take appropriate action. You should consider if climate change is a material risk. If so, you will need to focus on it and perhaps advise the client to seek specialist advice. If the expected impact of climate change on the client/matter is modest, then you should note why and warn the client about the extent of those risks. You should take instructions. With minor risks, you can allow the client to take on those risks; we will not be responsible for them, so long as we've been clear with the client and they have made an informed decision.
• Set out below is some guidance aimed at property matters, which is the area most likely to be impacted by climate change. It explains what we can and should do.
• Climate change in property matters

1. Climate change presents two types of risk to property purchasers:

1. Physical risks

These include:

• future damage by surface water flooding from extreme storm events
• sea level rise and coastal erosion
• unavailability of local water sources and lack of use of the property due to extreme heat and
• subsidence, also from extreme heat

Theseimpacts are set to worsen in scale and frequency in the coming years. They may result in costs and damage to property, devaluation of property, and, at worst, complete loss of property and associated risk to life.

1. Transition risks

1. These arise from the transition to a lower carbon economy. For example:

• changes in regulation and guidance from financial and other regulators (e.g. Bank of England, PRA, Law Society and SRA)
• market practices of insurers and lenders
• ultimately, the attitudes of more informed and risk averse purchasers, resulting in reduced market values

What do we do about this?

To discharge your duty, you should make use of the commercial search tools which are available. You will usually need to do at least one appropriate search in all cases. Where you believe no search is appropriate, you should say why and have your client approve that in writing. It needs to be their informed choice (see Excluding Liability below).

Depending on the results of the search(es) you do and the property, you may need to do follow up searches. You will need to discuss the results with the client and report on the implications of climate change in your report on title.

Available searches

The types of searches that are currently available are:-

For residential matters:

• TerraFIRMA Climate Report
• Groundsure Avista
• Groundsure ClimateIndex
• Groundsure Homebuyers
• Landmark Residential

For commercial matters:

• Groundsure Review
• Groundsure Screening
• Landmark Commercial

Which searches should I use?

It will largely depend on due diligence requirements of your client, which include any mortgage lender that you are acting for.

The deciding factors are different depending on the type of transaction and are therefore broken down below:

Commercial Properties:

There are various indictors that will help you to determine the type of search required in each scenario. These include:

the client's instructions - i.e. what they are looking to find/what is intended future use of the site

• common knowledge of the area - for example, whether it is in a known coal mining area, near a river or a costal property
• ClimateIndex- some banks already use ClimateIndex as standard in their lender specific requirements, so this could be required by a lender and not available in all searches
• guidance from the platform through which you are ordering your searches - consider any alerts that pop up, as they may help steer you towards certain searches

Examples:

• If mining/coal comes up, then the Avista is best, as it includes an official CON29M and a non-coal mining report as standard.
• If the client isn't in a mining area but wants planning, energy or transportation, then a Homebuyers search will be suitable.
• If they just want the minimum environmental compliance requirements, a Homescreen search will suffice.

• size of the site

Residential Properties:

As noted above, there are various indictors that will help you to determine the type of search required in each scenario, and these are:-

• the client's instructions - for example, what they are looking to find/what is future intended use of the property
• common knowledge of the area - for example, whether it is in a known coal mining area, near a river or a costal property
• Climate Index - some banks already use Climate Index as standard in their lender specific requirements, so this could be required by a lender and not available in all searches
• guidance from the platform through which you are ordering your searches - consider any alerts that pop up, as they may help steer you towards certain searches.

Examples

• If mining/coal comes up, then the Avista is best, as it includes an official CON29M and a non-coal mining report as standard.
• If the client isn't in a mining area but wants planning, energy or transportation, then a Homebuyers will be suitable.
• If they just want the minimum environmental compliance requirements, a Homescreen search will suffice.

Below is a table which includes all the various searches, their features and when it will be applicable to use each of them. The search provider platform will also provide guidance on this depending on the location, type of property and type of use.

Searches

Features/Used for

HomeScreen

• Residential single property only
• Suitable for properties up to 1 hectare

Homebuyers

• Includes Climate Index
• Residential single property only
• Suitable for properties up to 1 hectare

Avista

• Includes Climate Index
• Residential single property only
• Suitable for properties up to 15 hectares

GeoRisk

(non-coal mining)

• Non-coal mining
• Recorded ground movement
• Natural ground stability hazards

GeoRisk+

(all mining and stability)

• Non-coal mining
• CON29M coal mining
• Cheshire Salt Search
• Recorded ground movement
• Natural ground stability hazards

Agriculture

Agricultural Report provides a detailed manual assessment of contaminated land risk, alongside a comprehensive review of agricultural features and many other environmental risks.

Review

(Commercial only)

High value transactions, complex industrial sites and redevelopments

• Includes ClimateIndex
• This supports your ESG compliance
• Most comprehensive environmental search report for commercial property
• Useful in redevelopment scenarios
• Over 106 million data points analysed to produce each Review
• Report
• Each report written & reviewed by our environmental specialist
• Named consultant can be contacted in case of follow up questions and queries

Screening

(Commercial only)

Screening provides the ideal environmental risk assessment for straightforward commercial property transactions and multi-site

portfolios.

• For Less complex commercial property transactions
• Includes ClimateIndex
• Each report written & reviewed by our consultants
• They can be contacted in the event of a query
• Site boundary on MasterMap
• Uses Land Registry Title polygons
• Concise and easy to navigate

Landmark Residential

Searches are property specific and the UPRN is used as the property identifier. The search covers:

• Flood risk
• Subsidence
• Costal erosion
• Heat stress

Landmark Commercial

Searches are property specific and the UPRN is used as the property identifier. The search covers:

• Flood risk
• Subsidence
• Costal erosion
• Heat stress

Costs of these searches and how to obtain them

Searches vary in cost depending on the provider and the type of search you require. When you begin ordering searches through your chosen platform, you will be provided with details of the cost so that you can take instructions from you client. The current range of costs for climate searches varies. Details of the cost of the residential searches can be found here: https://www.groundsure.com/residential-searches/ and the cost of commercial searches here: https://www.groundsure.com/commercial/ https://www.landmark.co.uk/products/climate-change-residential/ https://www.landmark.co.uk/products/climate-change-commercial/

What happens if you don't know which search to use?

If you are unclear on which search to use and would like advice before discussing this with the client, please contact Tracy Rosewarne- the Head of Conveyancing Standards- on Tracy.Rosewarne@Keystonelaw.co.uk or 0203 8734437.

What to discuss with client

You will need to discuss with and advise clients on all physical and transition risks that you are aware of and that have been disclosed in the searches you have carried out. This includes full and clear explanation of climate risk, including physical damage, possible future impact on insurance, acceptability of the property as lending security, and effects on market value. To assist with this, some template clauses can be found in the Stationery and Templates section of Keyed-In named: " Report Clauses". These can be copied into your legal report and subsequently tailored to your specific transaction.

What to report to the lender

Whilst the UK Finance Lenders Handbook currently makes no specific reference to climate change, this could be updated at any point. At 5.4.1 there is an obligation that you must ensure that all usual and necessary searches and enquiries have been carried out, and you must report any adverse entry to the lender. Climate change searches would therefore fall under this obligation.

Lenders are also beginning to create a list of "black ball" properties where certain climate risks are apparent and upon which soon they may refuse to lend. You must, therefore, ensure that the Lender is aware of anything that could affect their security during the mortgage term granted. Please also see guidance in the Dealing with Lenders Policy on reporting matters to the lender.

Excluding Liability

In certain circumstances it may be possible to exclude the liability for advising on climate change when reasonable. The client's fully informed consent would be required. That would necessitate a full and clear explanation of climate risk, including physical damage, possible future risks on insurance, acceptability of the property as lending security, and effects on market value.

It will not be possible to exclude liability when acting for a lender or when it is obvious that a client needs advice. Examples of when it would be obvious that a client will need advice are:

• buying a coastal property
• buying a river fronted property
• buying a property in a known flood risk area
• buying a property which a known subsidence history
• buying a property in an area known for ground stability concerns/issues

File notes

As with any risk that we advise clients on, it is essential that you keep a detailed contemporaneous record of the advice provided, including any advice given during telephone calls or meetings. Your file note should record the client's objectives, the options discussed, the advice given, any warnings provided, and any decisions made by the client. Where a client elects to proceed against advice or accepts a particular risk, this should be recorded clearly and confirmed to the client in writing wherever practicable.

Good file notes can be critical evidence if the advice provided is later questioned.

High risk factors

There are a number of factors that can help determine if a property is a climate change risk. These are:

• coastal properties
• river fronted properties
• properties in known flood risk areas
• properties with a history of subsidence
• properties in an area known for ground stability concerns e.g. mining areas
• properties with basements that are prone to flooding