Newbuild Flood Risk Insurance Hike
After the 2007 floods the buildings insurance industry threatened to withdraw flood cover from home insurance policies where the property was in ‘significant’ risk of flooding ( 1 in 75 years risk or more ). The Government came to an agreement whereby they would invest in flood defences in the areas with a high flood risk, if the insurers continued to insure the properties. The agreement was known as the ‘Statement of Principles’ and came to an end in June 2013.
In July 2013, a new agreement was reached between the Association of British Insurers (‘ABI’). The agreement known as ‘Flood Re’ is going to be funded by a levy of around £10.00 on every household insurance premium in the UK.
Under Flood Re flood insurance premiums will be capped according to the council tax bands. The extra levy on insurance premiums will be pooled to create a fund that will pay for claims for properties in high flood risk areas.
There are exclusions from Flood Re, these being business premises, houses in high council tax bands such as band ‘H’. Perhaps the most significant exclusion is all newbuild homes built after 2009.
The exclusion of newbuild homes is due to the increase in the building by developers, in flood plains and the Government have said that by excluding newbuild homes from Flood Re they would be deterring the developers from building on flood plains.
Another argument is that newbuild properties should be designed to withstand flooding with methods such as the use of swales, man-made ponds, underground tanks for surface water drainage, drainage pumps, raising the land and the use of raised or concrete ground floors in their design.
Where does that leave the owners of newbuild homes? If newbuild homes are going to be expensive and difficult to insure, they will be less marketable. Any potential buyer of a ‘second hand’ newbuild home that requires a mortgage, may find it more difficult to obtain a mortgage to enable them to purchase the newbuild home. The result being that the newbuild home may be more difficult to sell on.
Further , depending on the location of the newbuild home the owners house insurance may be high, in some cases over a thousand pounds a year
At iconvey, we have conveyancers who are very experienced in handling the purchase of newbuild homes, scrutinising the planning documents carefully for conditions set down for flood mitigation and making sure that they are being carried out. The client is always fully informed of the methods being used in the construction of the newbuild home to reduce the flood risk and whether or not the property is within a flood risk area with a ‘significant’ risk of flooding.