Five Counties Conference Flooding and its effect on property values

Transcription

1 Five Counties Conference Flooding and its effect on property values Sue Highmore Property Consultant 6 March

2 What are we going to cover today Why flooding matters Why clients might be worried insurability value development potential What you can do to improve advice to clients better due diligence flood risk screening practical solutions and costs 2

3 Climate change Events of this kind are expected to become more frequent (Pitt Review) Severe flooding is likely to be a phenomenon we will have to learn to live with (Met Office) More intense rain (15-30% according to CCRA 2012) Increased peaks in river flows by 60% by 2080 s (CCRA 2012) Sea level rises up to 1m by end of century (CCRA 2012) Past building on flood plains means properties are in the wrong place for these changing conditions (210,000 in last 10 yrs) 3

4 York again! York, North Yorkshire (BBC, 2012) 4

5 Flooding - scale of problem in England & Wales Environment Agency Report million at risk of this type alone River or Coastal Flooding Surface Water Flooding 1.4 million at risk of this type alone 1 million at risk of both types of flooding 5

6 1 in 6 properties at flood risk today Average costs of flood claim Residential property - 20,000-30,000 Commercial property - 75, ,000 6

7 Projected increase in properties at risk 7

8 April 2012 June

9 September 2012 November

10 Flooding effect on business Inaccessible/damaged premises Lack of essential services Loss of stock Inability to trade Loss of profit Long term loss of customers and goodwill Not all this is insurable 10

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12 Bridge at Workington, Cumbria 2009 Photo credit- Phil Noble, Reuters A rescue team helps a stuck car at Ford River Crossing, West Midlands (ITV, 2012) 12

13 Flooding effect on people Ill health (often prolonged) Death Inconvenience displaced for months Emotional upheaval Sewage contamination means discarding possessions 13

14 Flooding effect on property value Structural damage Contamination Reduced valuation RICS attitude Red Book (2012) pages 37, 61, 209, 273 New RICS Guidance note consultation Jan 2013 Institutional Investor Group on Climate Change report 2010 College of Estate Management report August 2011 Lender reaction 14

15 Bluebell Lodge, Belford Picture courtesy of George F White & Co 15

16 Flood risk is relevant to flats too Spencer Court, Newburn September

17 St Asaph, Wales, November

18 Main types of flooding River (fluvial) Coastal Surface water Groundwater Dam or reservoir 18

19 River flooding Greatest public awareness Not just rivers canals culverts (drains or rivers) Environment Agency defences hard defences soft defences (water meadows) functional food plain 19

20 River Exe 2012 Daily Mail,

21 Coastal flooding Greatest volume of water Highest near the coast BUT River surges Thames Humber Severn Environment Agency defences hard defences dunes managed retreat 21

22 Plymouth Lido BBC,

23 Surface water flooding major threat Pluvial/Flash/Urban/Localised Spring/Summer 2007 & 2012 Causes 50% of flooding Rapid onset (and escape) Exacerbated by Impermeable surfaces Inadequate drainage Waterlogged soil Hard defences ( surface water cannot escape to river) 23

24 York river flooding 24

25 York river & surface water flooding 25

26 JBA Surface Water map for Leeds 26

27 JBA Surface Water map for Goole - flooding

28 1 in 200 Surface Water risk in London 28

29 Groundwater flooding Least understood Depends on geology Lasts for ages London & South East 29

30 Groundwater flooding Landmark BGS Geological Deposit Data 30

31 Dam or reservoir flooding Very Rapid Unpredictable Old infrastructure Maintenance issues National register Daily Mail,

32 Flooding insurance payouts bn 2012 June only - 500m 2009 Cumbria 174m bn bn

33 Changes in insurance practice 2007 big bill and reinsurance attitude forced a rethink Insurers can now make a better assessment of flood risk May result in: higher premiums higher excesses whether or not it actually floods exclusions more stringent conditions Flood insurance may be unavailable or very expensive Property unmortgageable? 33

34 Insurance and lenders RESIDENTIAL PROPERTY Council of Mortgage Lenders It is a standard condition of all mortgages for the property to be covered by standard buildings insurance, including flood cover, for the full term of the contract, in order to protect the borrower and the lender. If insurance is not available, then it is unlikely that a property will be mortgageable. COMMERCIAL LENDERS typical LMA compliant debenture The Borrower shall maintain insurance of each Property against loss or damage by fire and other risks normally insured against by a person owning similar properties under a comprehensive buildings insurance policy whether caused by acts of terrorism or otherwise 34

35 Changes in insurance practice Statement of Principles June 2008 (first was 2000) kept flood insurance available for residential/small business effectively subsidised premiums for high flood risk properties expires on 30 th June 2013 and will not be renewed Defra report: Flood risk insurance: a road map to 2013 and beyond many homeowners and businesses in high flood risk areas may not be able to get insurance for flood damage...many more will see a high rise in insurance premium and excess Government/ABI still negotiating Flood Re? But not applicable to commercial property does not limit excesses 35

36 Lender s reaction IF AWARE OF THE FLOOD RISK Don t lend at all Don t lend as much preserve LTV ratio Insist on property level protection against flooding Retention from loan until PLP works done SO Instruct valuers to reflect flood risk in valuation Compulsory flood desktop search as initial screen 36

37 Potential loss of property value No mortgage/less favourable terms fewer purchasers, lower price Insurance costs higher potential price chip Tenants may exclude repair liability for flood damage Development more difficult/expensive NPPF (and accompanying guidance ) Flood Risk Assessments - expense Connection to sewers - expense SUDS expense and ongoing maintenance Planning consent for rebuilding may be refused due to flood risk 37

38 Flood and Water Management Act 2010 Better disaster planning Lead Local Flood Authorities Move from flood defence to flood risk management Better record keeping of actual floods National Flood Emergency Framework for England Flood and Coastal Erosion risk management strategy Practice run Operation Watermark March 2011 New properties from Jan 2012 the developer must pay for FCERM work 38

39 Planning law NPPF replaced PPS 25 NPPF (April 2012) replaced PPS25 Flooding is in paras and additional guidance Country divided into 4 zones: 1 (low risk); 2 (medium risk); 3a (high risk); 3b (functional flood plain) Development in Zones 2, 3a and 3b must satisfy sequential test exception test Environment Agency to be consulted about Zone 2/3a/3b 39

40 Drainage changes increase cost Sustainable drainage systems (SUDS) replace or supplement conventional drains for new developments SUDS allow the surplus water to settle in storage areas or infiltrate into the ground SUDS will be adopted by the Drainage Authority (with a fund for maintenance) Drainage system requires approval (s106a) Connection to public sewer requires s104 agreement and adoption (s106b) 40

41 SO HOW CAN SURVEYORS HELP? 41

42 What can surveyors do? ACTING FOR SELLERS Find out in advance if there is a problem Pre-emptive disposal of risky properties Explore protective measures to counter a price chip ACTING FOR BUYERS/LENDERS Ensure better due diligence Present a better risk profile to prospective insurers Advise on protective measures and their cost Renegotiate price 42

43 What can surveyors do? ACTING FOR DEVELOPERS Find out in advance if there is a problem Include the extra costs in the development appraisal Advise on the plan for use of the property and its design Research alternative sites ACTING AS PROPERTY MANAGERS Know your risk and how to argue with the insurer Research protective measures and cost ALWAYS CONSIDER A FLOOD SEARCH 43

44 Flawed reasons for not doing flood search No watercourse/coastline near the property The government/abi will agree something Lenders don t insist RICS does not insist Lawyers will spot the problem with searches/enquiries Environmental search will cover it Environment Agency free search will do The search result will have to be disclosed 44

45 Why you should do more Cost is relatively low Cannot use contract to reallocate risk Lawyers tend not to do flood searches Client can take measures to improve risk Flood risk should be made part of the mandatory search requirements Pitt Review (Recommendation 63) Lender may insist 45

46 Why the EA Flood Map and NAFRA won t do Tell only half the story no surface water or groundwater Flood map assumes no flood defences NAFRA has drawbacks grid is too large assumes flood defences work perfectly (but they don t) no prediction of depth of flooding Land Registry Flood Risk Indicator EA information in disguise and they charge a fee 46

47 A desktop search can be more useful EA flood map Desktop flood mapping 47

48 Surface water flooding data choose well Surface water data not available from EA Pick one that does not over dramatise the risk local rainfall and surface absorbency choice of return period takes into account average local drainage capacity Ensure it predicts depth of flooding Ideally use a small grid so can focus on that property JBA is a leading provider of flood data and modelling used by EA, LLFAs, majority of insurers and many search providers 48

49 A good desktop flood report includes Same data as used by insurers: EA floodplain data EA NaFRAassessment of risk flood defence data (river and coastal) surface water flooding data (of an accurate variety) Topographical data Groundwaterflooding data Historical flood data Other data? (for example, dam or reservoir flooding) 49

50 A good desktop flood report includes A decent risk assessment taking all of this data into account (ie not just NaFRArating or data alone) Easy to understand summary page and maps so client can read it Practical suggestions of what to do if a risk is identified, with indicative prices The ability to ask the provider follow up questions (ideally free) Reasonable terms and conditions including transmissibility and adequate PI insurance 50

51 Easy to understand results Argyll Environmental FloodSolutions range 51

52 Easy to understand results Argyll Environmental FloodSolutions range 52

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55 Additional comments (if required) Argyll Environmental FloodSolutions range 55

56 Additional comments (if required) Argyll Environmental FloodSolutions range 56

57 It is not expensive Argyll FloodSolutions screening reports Prices for larger sites may differ Combination searches flooding and environmental issues Upgrade to next report (Consult or FRA) for a top up payment 57

58 What if it failed desktop assessment? IT IS NOT NECESSARILY A DISASTER A more detailed report including a site visit (flood mitigation survey) how much of site is at risk? More enquiries into local drainage and flood defences Property level flood protection measures Negotiate with the insurers Reduce the price Client can plan use differently A Chartered Surveyor can assist here 58

59 What to do next flood resistance measures Good up to 60-90cm depending on structure 90% of flooding is below 80cms Baffles in front of doors, windows, airbricks Non-return valve plumbing Temporary or self-raising barriers around the property Tanking Cost affordable - CCC report July avg 4000 Kite marked products 59

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61 Grade 1 Listed properties in Stratford upon Avon Slide courtesy of Revetment Ltd

62 Slide courtesy of Revetment Ltd 62

63 Cost of flood resistance measures Baffles Plumbing Standard door 675 Double door 1000 Window 500 Roller shutter door (incl channel) Air brick 60 (for small air brick) Sophisticated non return valve Simple toilet non return valve 90 Prices are ball-park and include fitting but exclude VAT Figures courtesy of Revetment Ltd 63

64 Temporary flood barriers Pictures courtesy of Revetment 64

65 Self raising barriers Picture courtesy of UK Flood Barriers 65

66 Self raising barriers Picture courtesy of UK Flood Barriers 66

67 Pictures courtesy of Total Flood Solutions Ltd 67

68 Cost of flood barriers Demountable barriers 1m high 400 per m length 0.5m high 275 per m length Self-raising barriers 1m high, 4m wide (supply only) Permanent barriers Per metre length 900 Prices are ball-park and (except for self-raising barriers) include fitting but exclude VAT Figures courtesy of Revetment Ltd 68

69 What to do next flood resilience measures Use materials that dry out faster Stone or concrete floors (not wood) C&S render and plaster (not gypsum based) Engineering bricks Raise electric sockets Use water resistant units (not mdf) Store vulnerable goods or equipment at upper levels More information available from specialist flood protection companies and booklet on Know Your Flood Risk site ( 69

70 Successful resilience 70

71 Not so successful due diligence 71

72 Record PLP measures for the future Available from November 2012 DEFRA/EA template Flood Risk Report to be completed by the surveyor/other professional engaged by the homeowner Produced in collaboration with insurers, RICS, Law Society. May help negotiate lower insurance rates Keep with the title deeds Records initial flood risk, PLP works done, reduced flood risk as a result and maintenance instructions 72

73 Where to get more information RICS A clear guide to flooding for property owners PLC Property free access notes - send to clients? (flood searches) (for lenders) (EA PLP report) Know your Flood Risk website DEFRA website 73

74 PLC Practice Note on Flood Searches may help

75 Conclusion There is business here for surveyors -add value You may be held to account by clients if you do nothing You may lose deals if the flood risk is exposed late A desktop flood search is easy, quick and cheap They are not difficult to interpret A good search offers you suggestions on what to do next and access to experienced consultants to help you advise your client What DEFRA recommend/ea provides is not enough If you have questions, then call Argyll 75

76 For more information Look at the Argyll website Contact Stewart Cooper or Simon Boyle at Argyll