Flooding – the Problem
Our climate is changing. It is becoming more dangerous.
Some countries, such as Australia are at particular risk of fire – as we have seen all too often on the news recently. In the UK probably the biggest risk (at the moment) is flood damage.
A recent report from the Climate Coalition tells us that recent studies have shown that the likelihood of extreme rainfall happening in the UK has increased by some 40% because of climate change.
Between 2007 and 2019 we had a major flood event almost every year and this is unlikely to change in the immediate future. It goes without saying that this flooding has caused immense damage to property and belongings with insurers having to pay out massive sums on flood damage claims.
For example, the Association of British Insurers reports that over £360 million was paid out for storm, flood and burst pipe damage after the ‘Beast from the East’ in 2018.
Going forward, the flood risks are not going to be confined to flood plains. For example, rises in sea level will result in increased flooding and coastal erosion in coastal areas.
Why landlords are more at risk
Not surprisingly insurance companies are starting to increase their premiums and in some areas at particular risk, insurance will become extremely expensive (with massive deductibles) or even not available at all. I understand that this is already the case in some areas.
Going forward this is only going to get worse.
However owner-occupiers are less at risk due to the government’s Floodre scheme.
The Floodre scheme works with insurers behind the scenes. So when someone buys home insurance cover, the insurer can choose to pass the flood risk element of the policy to the scheme for a fixed price. Then when a valid claim is made for flood damage, the insurer will pay the claim, and will then be reimbursed from the Floodre fund.
This allows insurers to keep premiums down for householders
However, this scheme is NOT available for private residential landlords. So landlords need to be particularly on the watch for risk of flood damage to their properties.
Here are some suggestions:
1 Research flood risk for your property portfolio
I would suggest that you carry out a flood risk audit for all your properties. Remember, this is only going to get worse so if action needs to be taken, now is the best time.
2 Consider changes to your portfolio if properties are at risk
If any of your properties are at risk of flood damage, you may want to consider selling them and reinvesting in properties on higher ground or where the risk is more remote.
Remember that if you are selling to owner-occupiers they will be able to take advantage of the Floodre scheme so the flood risk is less of a (financial) problem for them.
3 Never buy an investment property on a flood plain
Apparently despite the risks, house building is still going ahead on flood plains. However, these properties should be avoided by buy to let landlords at all costs. As well as any other properties which are at serious risk.
Evaluation of flood risk should be an essential part of your investigations when considering property investment.
This is just one of the problems facing us as a result of the climate emergency.
However, as landlords are particularly disadvantaged due to their exclusion from the Floodre scheme it is important that you are aware of this risk and take proper precautions.