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Environmental Searches

18 February 2015

Risk and responsibility

 

The Council of Mortgage Lenders Handbook requires conveyancers to procure Local Authority searches to determine whether there are any contaminated land records. However it does not contain a general requirement for environmental search reports, though risk appetite obviously varies between individual lenders (as set out in Part 2 of the Handbook), with some prepared to consider, or requiring, environmental reports. Most, though not all, lenders accept agency/personal searches, but this is at the risk of the conveyancer who will need to ensure that the search agent is both suitably qualified and has indemnity insurance which adequately protects the lawyer.

 

The risk appetite of clients and properties can also vary. The CLC Code of Conduct requires that clients receive good quality independent information, representation and advice. It also requires the identification and mitigation of risks to clients. Applying a risk-based approach to finding out as much appropriate information and opinion about the land on which the property is placed, should help give clients the information they need to make an informed decision and enable LCs to meet their regulatory responsibilities.

 

It is likely to be appropriate to mention any potential risk to your client, and make enquiries of the seller, and if appropriate, make further investigation as judged proportionate to the perceived risks, liaising with clients in relation to which, if any, searches, or other investigation, might be appropriate as well as the terms on which building insurance is provided and discussing the level of risk to which the property is exposed.

 

Ultimately, the decision of whether or not to undertake a particular search might lie with the client. Whether or not they proceed, it is prudent to document the discussion regarding the advisability of having a survey/independent search, to be able to demonstrate that the buyer was given the information to make an informed decision (but chose to ignore the risk, should that be the case).  The buyer should also be encouraged to investigate the buildings insurance position at an early stage in the transaction.

 

Searches   

 

The search market is not regulated. It is likely to be beneficial to attempt to check that the agency you are looking to procure the search from will provide the information most aligned with your client’s requirements, whilst also being acceptable to your lender.

 

Screening reports are first-stage, desktop, and high level reports. They are often available quickly and at low cost. The report might contain information obtained from local authorities, the Environment Agency, Coal Board, Department of the Environment, Transport and Regions, British Geological Survey, Land Registry, Ordnance Survey and/or other data providers.

 

Such a report may not provide all information regarding the risks facing a property. The report is unlikely to be property-specific and the provider is unlikely to have visited the property. They are however a likely source of indication as to whether further investigation might be needed by specialists (e.g. Chartered Surveyors, Building Engineers, Civil Engineers or other).

 

Licensed conveyancers (LCs) are not qualified to advise on technical matters regarding search results. Should a client have any questions they are probably best answered by the report provider.

 

Specific searches - Flooding

 

Groundwater levels are currently high and can be a threat even when not near a river; the Environment Agency estimates there is risk for one in six homes in England. Surface water, ground water and overflowing sewers are also increasingly common causes of flooding.

 

The Flood page on the Environment Agency’s website includes resources such as a flood map which provides some information on areas affecting by flooding, but does not give information about a specific property, the extent of the flood, or flooding from sources such as groundwater, surface water or overflowing sewers. The Land Registry has combined this data with its own to inform its Flood Risk Indicators which provide information on a title-by-title basis about the possible risk of flooding to a property. This can be purchased online. However, given it has some reliance upon the Environment Agency data it is unlikely to be sufficient to be solely relied upon. Both the Flood Map and the Flood Risk Indicators are screening reports.

 

The Flood Risk Report template was developed by government and industry. It records the flood risk of a property, before and following installation of flood resistance and resilience measures. It is recognised by the insurance industry as a standard approach, provided a professional, suitably qualified, independent surveyor has completed it. This is likely to include ground stability and/or historical mapping (and if needed, further LA enquiries). Insurers may take into account the information and flood protection measures when assessing the terms they will offer for cover.   

 

Specific searches - Planning

 

The National Planning Policy Framework (NPPF) reflects the government intention to make the planning system less complex and easier to understand. It sets out planning policies for England and how they are expected to be applied; providing guidance, both in drawing up plans and making decisions about planning applications. The hint of a new road, housing development or railway can be enough to blight a property.

 

Existing planning search information obtained through a property search provider identifies what has been approved or rejected but is not necessarily representative of what might be allowed in the future. This might require deeper due diligence on the planning matters such as procuring independent professional opinion on the kind of development and it’s likelihood, in the context of the NPPF regime, of being approved.    

 

Specific searches - Land Contamination

 

Whilst the house to be purchased may be in good condition, the land it is built on may not. Usual searches, such as local searches, are unlikely to cover this, as they often do not reveal any landfill sites, waste disposal dumps, toxic emissions, flooding, radioactivity, subsidence or land contamination. This might mean property purchasers have liabilities such as those set out in the Environmental Protection Act 1990, where normally the original polluter or builder of a property who is liable, but in some circumstances, the current owner of the land or property might be liable for paying for the clean-up costs of the land. 

 

In some circumstances the perception of contamination, even if no risk is evident, can effectively blight a property and make it difficult to sell, dramatically affect the property’s value or potentially preventing, or injuring, future transactions.

 

Many search companies keep large databases of environmental information, including land use information from old Ordnance Survey maps, and often issue some form of certificate – often accompanied by some form of insurance cover or warranty - to confirm there is little likelihood of contamination being present. Possession of a private company certificate does not definitely confirm the absence of contamination. Conversely, absence of a certificate does not mean a property is contaminated. Only Local Authorities (LAs) can make such a decision.

 

If the search company has concerns about the site it would be beneficial to approach the relevant LA to determine if it has further information such as site investigation and remediation reports indicating the site’s condition (a fee is usually payable for details in writing). It might also prove beneficial to contact the LA’s Planning Services or Building Control team (or equivalent).

 

Who Owns What

 

In many parts of England and Wales it is fairly common that someone will own the surface of the land but someone else will own the land – the ‘mines and minerals’ - below the surface. Where someone owns the mines and minerals they will own it indefinitely. Under new law, such landowners were encouraged to assert their rights over these minerals through application to the Land Registry (by October 11th 2013).

 

There was much media coverage in the summer of 2013 regarding Church Commissioners asserting ownership of 500,000 acres of land. Many people owning properties on this land were not previously aware of the fact that someone other than themselves owned the land below the surface of their property. Some raised concerns about the motive of the declarations but Church Commissioners advised “there is absolutely no link with fracking”.

 

Fracking

What is fracking: the process of hydraulic fracturing which recovers gas and oil from shale rock. Such gases are known as ‘unconventional’ as they are trapped in deep underground rocks which are hard to reach. Until recently unconventional gas reserves haven’t been exploited because the cost was too high or the technology wasn’t available. Technology advances mean that extracting methane from these sources could become more economically viable. The gas is recovered by drilling down into the earth and then directing a high-pressure water mixture at the rock which is fractured apart by the high pressure mixture.   

Concerns include: the environmental cost of transporting vast amounts of water to the fracking site; potentially carcinogenic chemicals being used, fuelling concerns these might escape and contaminate surrounding groundwater, or pollute the air; small earth tremors (in 2011 two earthquakes of 1.5 and 2.2 magnitude struck the Blackpool area following fracking); degradation of communities and loss of incentives to invest in renewable energy.

Advantages include: difficult-to-reach resources of oil and gas can be harnessed; in April 2013 the Climate Change Committee said that shale gas in the UK may help to secure energy supplies (it is estimated that in the US and Canada it has provided gas security for approximately a century and offers an opportunity to generate electricity at half the CO2 emissions of coal); and potential to provide an economic boon and employment. 

In July 2013, the Department of Energy & Climate Change (DECC) issued About shale gas and hydraulic fracturing (fracking). The document provides a synopsis of the government’s response to common questions on the topic. It stated that shale gas activity in the UK was still in the exploration stage with test wells being drilled in Lancashire. Should the DECC determine, as a result of those tests, to approve a Field Development Plan, the relevant local authority must first grant planning permission, in consultation with the Environment Agency, or Natural Resources Wales. The assessment would consider the need for an Environmental Impact Assessment, environmental permits and impacts on the local community. DECC will require geophysical surveys so that planned wells are located in low risk locations.    

A British Geological Survey estimates there may be 1,300 trillion cubic feet of shale gas present in the North of England alone. The Chancellor, George Osborne, has commented that large-scale fracking, though not likely to lead to big reductions in household gas bill, could boost tax receipts and aid the UK economy. As part of an “all-out” drive to promote such drilling, which he considers could be a “fresh driver” of UK growth,  the Prime Minister has announced that Councils which back fracking will get to keep more money in tax revenue .

A small number of companies are currently exploring for shale gas in locations across the UK. Cuadrilla, one of the energy firms hoping to exploit the UK's shale gas resources, has recently announced it is intending to apply for planning permission to drill and frack at two Lancashire sites,whilst landowners in the Sussex Downs National Park are mounting a "legal blockade" to block a potential fracking site. Six organisations, including the RSPB and the National Trust have issued a policy proposal document 'Are we fit to frack?' which seeks to limit the potential impact of fracking on the environment. This comes after the government said it may alter trespass law to make drilling under property easier for companies.

Website Resources

CML Handbook, Part 1, Item 5.4 Searches and Reports

Environment Agency – responsibilities include contaminated land, flood and coastal risk managements, determination of disputes between applicants for first time sewerage and sewerage undertakers; The Environment Agency – What’s in Your Backyard website area can be used to search for industrial pollution and location of landfill sites in a given locality as well as other environmental information such as flood risk, air quality and sources of drinking water.  Provides a number of maps, including maps on flooding, coastal erosion, pollution, landfill and bathing water areas

Land Registry  

Natural Resources Wales

 

CLC Handbook/Codes references 

Accounts:  Search fees

Acting as Insurance Intermediaries: FCA resolution re: search indemnities

Acting for Lenders/Mortgage Fraud:  mentions Land Registry, Land Charges, Company, Bankruptcy and Index Map searches

Transactions: Land Registry search period, Local Authority search and search certificates

Land Registry Practice Guides

Practice Guide 19 - Notices, restrictions and the protection of third party interests in the register

Practice Guide 65 - Registration of mines and minerals

Practice Guide 66 - Overriding interests losing automatic protection in 2013