Flooding—issues in banking and finance
Produced in partnership with Simon Tilling and Michael Barlow of Burges Salmon
Flooding—issues in banking and finance

The following Environment practice note produced in partnership with Simon Tilling and Michael Barlow of Burges Salmon provides comprehensive and up to date legal information covering:

  • Flooding—issues in banking and finance
  • Effects of flooding on underlying assets
  • Individual risks
  • Planning policy
  • Availability of insurance
  • Borrower default
  • Lender due diligence
  • Protection for lenders

Effects of flooding on underlying assets

Flooding can give rise to a number of issues in the context of a banking or finance transaction. This Practice Note highlights the issues in relation to the following:

  1. individual risks

  2. planning policy

  3. availability of insurance

  4. borrower default

It also explains the steps that a lender can take to mitigate the risks posed.

Individual risks

Flooding can cause significant damage to businesses, property and people. It can affect an individual’s decision on whether to buy or rent a property. It can also have an effect on a property’s value. The Royal Institution of Chartered Surveyors (RICS) Guidance on Valuation now places greater emphasis on factoring in flood risk when valuing a property.

The value of a house or commercial property may be discounted due to the risk of flooding. This is not only because of the damage that flooding can cause but also as a result of increasing costs of flood insurance cover. Higher excesses or the requirement for more extensive conditions of cover in properties deemed to be in flood prone areas may lead to discounts in purchase prices or rent.

Planning policy

Local authority planning policy now pays more regard to the flood risks to which new developments may be exposed. Development sites which have a high flood risk may be difficult to exploit, or require more to be spent on flood protection

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