Good news for homeowners in flood risk areas!
New scheme known as Flood Re has been introduced to help provide more affordable building insurance.
Storms Desmond, Eva and Frank caused devastating floods in the UK during late December 2015 and the New Year. Just over 3,000 families were placed into alternative accommodation whilst repairs were carried out on their homes. The Association of British Insurers (ABI) have estimated around £1.3 billion will be spent on customers affected by the flood damage with the average expected pay out for each domestic claim being £50,000.
Some may believe that they are not at risk as they do not live near a river or in a coastal area, however, surface water and sewer flooding are becoming common causes of flooding. In England, 1 in 6 homes is at risk of flooding and 3 million of these are at risk from surface water flooding. It has even been suggested one’s property is more likely to get flooded than burgled.
Before now, being in a flood risk area has resulted in difficulties obtaining building insurance, securing mortgages and could even reduce the sale value of the property. However, from April 2016 a new scheme, known as Flood Re, was introduced which helps to provide more affordable building insurance to homeowners. The way it works is the scheme collects an annual tax from every home insurer in the UK which contributes to a yearly central fund of approximately £180 million. The insurer passes on the flood risk part of your insurance policy meaning Flood Re takes responsibility and in the event of a claim Flood Re will then reimburse the insurer from the central fund. It is estimated the scheme will help 350,000 homeowners, however, certain criteria must be met in order to be eligible for the scheme; (1) the insurance policy must be in the name of, or on trust for, an individual; (2) the property must have a domestic council tax band of A to H; (3) the property must be used for residential purposes; (4) the property must have an individual premium; (5) the policy holder, or their immediate family must live at the property or the property must be unoccupied; (6) the property must have been built before 1st January 2009 and lastly (7) the property must be in England, Wales, Scotland or Northern Ireland (Isle of Man and Channel Islands excluded). For more information and advice including examples of exclusions please go to the Flood Re website (http://www.floodre.co.uk/homeowner/).
Whether you live in a flood risk area, are looking to purchase a property in a flood risk area or even due to sell a property in a flood risk area the new scheme should provide assistance. As part of the conveyancing transaction flooding is investigated in a number of ways. For example, the seller indicates on the Property Information Form whether they are aware if the property has ever flooded, if so, further enquiries may be raised for the seller to answer. Flooding is also highlighted as part of the Environmental Search, which is a desktop search, and if it is revealed, further searches may be requested such as a Flood Report which provides more detail. If you have a survey carried out on a potential purchase property, and/or a lender’s valuation report, then this may also reveal signs of flooding. As a buyer, you may also wish to make your own investigations; for example through enquiries with the local council, on the Environment Agency website or through the Land Registry website using the Flood Risk Indicator which costs £10.80 including VAT. Before you enter into any contract to purchase a property it is imperative you ensure building insurance is available on suitable terms to include flood risk. When purchasing with the aid of a mortgage, as your solicitors we are also under an obligation to the lender to check and verify that you have suitable insurance in place by the time you exchange or complete the purchase, depending on contract terms
Looking at the current flood statistics and the possibility of numbers increasing further in the future, flood risk is an important factor to consider not only to benefit you as an existing or soon to be homeowner but also for when you decide to sell in the future.