Developers building homes on brownfield land can now get insurance cover for remediation costs and loss of value if contamination problems re-emerge.
The new product, “LandPro”, is a site-specific policy. It will be offered to home buyers and mortgage lenders as well as property developers.
Unlike existing environmental impairment policies, the new product indemnifies policyholders for a fall in the sale price of the property as a direct result of recurring contamination problems.
Rupert Daniell, of the BCD underwriting agency, developed the product in collaboration with Liberty Legal Indemnities. He believes that cover for a housebuyer’s possible loss of value is unique and could be a valuable marketing tool for developers trying to entice buyers on to formerly contaminated sites. By offering LandPro cover, Daniell argues that developers will be able to maintain sale prices.
Dr Paul Pritchard, an environmental adviser at Royal & Sun Alliance, said: “This is quite innovative. Commonly, when a development goes ahead, some cover is available against being served with a remediation notice by the environment agency, but it is novel to insure loss of value. There is an attraction from a developer’s point of view, because loss of value is likely to be more important than a formal notice.”
David Oakley, of specialist property insurance broker Cadogan, added that it is unusual for environmental policies to be site-specific and to be aimed at residential dwellings.
LandPro policies are being offered for a 10-year term or, for mortgagees, for the life of the mortgage. Any loss of value will be calculated on the basis of the open market value of a similar property free from contamination at the time of resale. The sale will have to be effected before a claim can be made, though the cost of remedial works will be met by underwriters.
The product’s launch follows the government’s announcement of plans for the remediation of contaminated land set out in Part II of the Environmental Protection Act 1990. The legislation comes into force in July this year.
PLS News 8/1/99
