7 key considerations when advising on climate risk in property transactions

The hottest summer in many years has highlighted the harsh fact that climate change is not going away. A recent practice note, Climate change and property, is the Law Society’s view of good practice, but it isn’t intended to impose new burdens on solicitors. Instead, the note seeks to support solicitors in understanding what they should, and should not, be doing in relation to advising clients on climate change risk in property transactions.

The practice note includes a helpful checklist of what, subject to client instructions, solicitors should consider doing regarding climate risk in property transactions. Summarised below, note that these points can be covered in the terms of engagement, the report on title or elsewhere. This may not be appropriate for your particular client, so it’s important to adapt it accordingly.

1. Explain to the client:

• that climate risks might affect the ability to insure, sell, let, develop or finance the property, and could cause damage, losses, costs, and inconvenience
• that to find out more about the risks, a climate risk search can be commissioned, or the client could consult their own building surveyor or other professional advisor on the impact of climate risks
• what the solicitor will or will not be doing (or has or hasn’t done) in relation to climate risk and that this may reflect the client’s particular knowledge and experience and who else is advising them.

2. Advise the client:

• on their potential legal liabilities resulting from any climate risks
• specifically, those risks identified on the particular transaction by the parties, advisers or search results, subject to the agreed scope of instructions.

3. Consider and advise:

• whether lender requirements might also require a climate risk search
• if you are acting for a lender, there is more information at section 4.3 of the practice note.

4. Record in writing:

• whether the client has decided to request a climate risk search
• whether they have considered other options for finding out how climate risks may impact the property.

5. When reporting the results of a climate risk search to the client:

• set out any opinion and/or recommendations from the search provider based on the results
• clarify that you are not competent to advise on the technical, practical and financial consequences which flow from the search results
• advise the client to consult the search provider or a relevant specialist.

6. Document any advice in writing:

• this can be recorded in the terms of engagement, the report on title or elsewhere.

7. Acting for the lender:

• if a climate risk search is obtained for a buyer (even if it was not required by the lender) and it raises concerns, you should, if aware of the concerns, seek instructions from the lender on whether they wish to proceed with the loan.
• section 4.3 has more information on acting for a lender.

The Law Society practice note does not say that solicitors must do climate risk searches. Carrying out such a search may be inappropriate in view of the sophistication of the client or the other professional advisors that the client already has. What the note does say is that solicitors should discuss with their clients whether they would like a climate risk search to be carried out and, if so, that the solicitor then reports on the results of the climate risk search. It’s important to be clear with your clients in your reports or elsewhere about what you are (or are not) doing in relation to climate risks.