On 12 May, the Law Society published the climate change and property practice note. The note provides practical guidance on what solicitors should consider when advising clients on climate change in the context of property transactions, and is suitable for residential and commercial property specialists..
The long and winding road
In recent years, the legal profession in the UK has experienced an onslaught of guidance and regulations relating to climate change, the Law Society embracing this with its Climate Change Resolution published in October 2021. This was followed with the release in April 2023 of the Law Society’s guidance: The impact of climate change on solicitors. This coincided with the launch by search providers of products predicting the future effect of climate change on real property, certain of which were accompanied by leading counsel opinion on solicitors’ duties when advising clients on climate change in property transactions.
While these efforts were no doubt commendable, for property lawyers this created a “perfect storm” leading to much uncertainty:
- What exactly are our duties when advising clients on how climate change may affect their properties?
- Do we now need to be experts on the physical effects of climate change?
- How far do we need to go to discharge duties to ensure we avoid being negligent?
The new note aims to address this confusion, and guide solicitors on what they should (and should not) do, in relation to climate risk when advising on property transactions.
Learning from previous experience, the Law Society engaged property experts across the sector to assist with drafting the note and consulted with a number of other industry organisations.
Structure of the note
The note is organised inti four main sections, briefly summarised below.
Climate risks
The note discusses three categories of climate-related risks which may impact on property transactions (and is accompanied by a physical risks technical note):
- Physical risks – physical impacts of climate change that might affect property transactions and/or influence insurability and financing, and which might adversely affect a property’s value in the future.
- Transition risks – changes made by governments, industries and consumers, among others, to respond to climate change in the pursuit of net zero, for example the anticipated changes to the Minimum Energy Efficiency Standard for let property.
- Legal or liability risks – actual or potential negative impacts from physical or transition risks which may lead to legal liability or obligation. The note includes examples such as financial penalties, increased costs to upgrade sub-standard property or being unable to implement a development as originally planned.
Checklist, sample wording and climate risk searches
The note provides a checklist of what, subject to client instructions, solicitors should consider doing regarding climate risk in property transactions, including suggested drafting which solicitors can include in letters of engagement and/or reports on title.
The note emphasises that solicitors are not qualified to advise on the physical risks of climate change and should advise clients to seek advice from qualified professionals.
There follows a section on climate risk searches (providing a relatively easy way for solicitors and clients to understand climate risks at a basic level), including discussions on how they work, their limitations and questions to consider when ordering one.
Climate risks in specific transactions
This section first concentrates on the importance of assessing clients’ intentions when considering climate risk, including interest, risk appetite and access to expertise. Solicitors may also wish to discuss matters such as:
whether buildings insurance terms cover losses caused or exacerbated by climate change; and/or
if financing is available and if it includes climate change-related conditions.
The note then discusses climate risk factors for specific transactions when acting for:
- a tenant on a letting for a market rent with little or no premium;
- a purchaser of freehold property or lease with capital value; and
- a lender.
Raising enquiries of the seller/landlord/borrower is also covered, highlighting the likelihood of these parties refusing to answer enquiries about the climate risks (particularly given these are future, unknown events).
Valuations and surveys
The final section of the note deals with valuations and surveys in the context of climate risks and provides a list of organisations who may be able to recommend suitably qualified professionals to provide specialist surveys or investigations.
Key takeaways
The note intends to support solicitors, not to impose additional duties. This is made clear throughout with the repetition of the key messages it intends to convey:
The significance of climate risks for a transaction (and consequently the level and nature of advice to consider) depends on varying factors, including the specific property and its intended use, along with the client’s knowledge, experience, access to specialist expertise and attitude to risk.
Solicitors are not qualified to advise on the physical risks of climate change.
Solicitors should focus on legal implications of potential liability arising from physical and transition risks, specifically those identified on particular transactions by the parties, advisers or search results.
Where any physical risks are identified which may have potential non-legal consequences, clients should seek advice from suitably qualified professionals.
All discussions, advice and recommendations should be recorded in writing during the course of transactions.
Amy Allen is a senior knowledge lawyer at Norton Rose Fulbright LLP
