Article contributed by Stephen Tromans KC

 

What advice should real estate lawyers be giving to their property transaction clients on the impact of climate change? 

 

Summary 

The overall theme of this piece is an exploration of the current state of play of the professional duties of transactional solicitors to advise and as far as possible protect their clients in respect of the risks which climate change may present. Whilst professional negligence is an area in which it is impossible to lay down hard and fast rules, and there is no definitive authority, there are a number of convergent factors which now make such duties much more of a reality. 

 

What are climate risks? 

The consequences of climate change are unfortunately becoming ever more obvious, in terms of extreme weather conditions, whether storms, droughts, extreme heat, and floods. These may affect property through flooding (either from rivers or drainage systems), coastal erosion, fires, and subsidence. These are physical risks, but in addition there are transitional risks as banks and other lenders, surveyors, and insurance companies become aware of these risks, affecting their willingness to lend, or insure, or property valuation. Such risks can therefore significantly diminish the value of property, or even make it unsaleable or unmortgageable.  

Increasingly banks are laying down internal procedures to guard against these risks. Professional bodies such as the Law Society are at an early stage of providing specific guidance. Importantly too, search products are emerging on the market which are able to identify specific properties at risk from climate change. 

How should solicitors and other conveyancers respond to this worrying and rapidly changing situation? 

 

General principles: 

The solicitor’s duty is defined by the scope of the retainer with the client. It will be necessary to consider the firm’s terms of business and the client’s external lawyer guidelines, if any. It might be possible to exclude climate change risks from the scope of a solicitor’s retainer, but this would not be straightforward as it would involve explaining to the client what those risks are and obtaining the client’s agreement to exclude them. In any event it is important to note the duty to warn of risks which come to the solicitor’s attention even if outside the scope of the retainer: see Stone Heritage Developments Ltd v. Davis Blank Furniss [2007] EWCA Civ 765. 

The standard of care is that of an ordinary competent solicitor, having regard to the standards normally adopted by the profession, being an objective test: Midland Bank Trust Co v. Hett, Stubbs and Kemp [1979] Ch 384. In addition, the size, nature, and sophistication of the firm may be relevant: Hicks v Russell Jones & Walker [2007] EWHC 940 (Ch), as may the firm having a specialist environmental department or holding itself out as having specialist expertise. However, all firms holding themselves out as doing conveyancing work should be aware of these risks which may affect clients. 

In County Personnel (Employment Agency) v Alan R Pulver & Co [1987] 1 W.L.R. 916 at 922D Bingham LJ stated that:  

 

“If in the exercise of a reasonable professional judgment a solicitor is or should be alerted to risks which might elude even an intelligent layman, then plainly it is his duty to advise the client of these risks or explore the matter further.” 

 

This may extend to information obtained while fulfilling the solicitor’s retainer, whether or not the matter in question is itself within the scope of the retainer.  

  

Whilst not definitive, guidance provided by professional bodies such as the Law Society will also be important in assessing the scope and nature of the solicitor’s duty. In this respect the law adapts to new situations, for example the development of duties in relation to contaminated land, from the Law Society’s “Warning Card” (2001) to its Practice Note on Contaminated Land (2014). Climate risks are not so different in nature from those involving contaminated land, albeit there is no corresponding legal liability framework as there is for contaminated land. The two types of risk – physical and transitional – are in play in both cases. 

 

As Jackson & Powell on Professional Negligence points out (para. 11-089): 

 

“Although these various sources are generally intended to reflect the existing practices of the profession, they have also led to a greater uniformity of practice. Thus it has become increasingly difficult for a solicitor to justify conduct which falls short of that described in the guides.” 

 

Law Society initiatives 

The Law Society published in 2021 its Climate Change Resolution (28 October 2021).1  This does not provide concrete guidance on the approach to climate change but it does resolve to support solicitors to be fully informed, and urges solicitors to engage in continuing legal education, approaching any matter arising in the course of legal practice with regard to likely impact on climate change, providing (whether through themselves or others) competent advice to clients on mitigating effects of climate change and “the potential legal risks and liabilities that may arise from action or inaction that negatively contributes to the climate crisis”. It also urges solicitors to advise clients about the benefits of disclosure of climate-related risks and opportunities relating to their entire business operation including supply chains, when reporting to regulators, investors, and stakeholders and on the assessment, monitoring, management, mitigation, and reporting on such risks. 

The Law Society’s Resolution does not provide practical guidance but it seems very likely that such guidance will be forthcoming in the relatively short term. 

 

“Levelling up” 

The standards expected of lawyers are capable of being ratcheted up by improvements in knowledge and best practice within law firms, so that the more solicitors who do provide advice on climate risks to clients, the greater the likelihood that a duty to advise may be found to exist. 

 

Availability of the tools 

As more tools and information sources  to assess climate risks for specific properties become available, solicitors are likely to be expected to make themselves aware of what is available and discuss with clients the importance of investigation. Obviously, the final decision as to whether to investigate a risk is for the client, however they must be properly advised by the solicitor, which involves the solicitor being aware of the risks, aware of what tools are available to mitigate such risks and communicating this clearly to the client. 

While there is as yet no case finding a solicitor liable to a client for failure to advise on climate risks, there are certainly a growing number of factors which make the prospects of such claims increasingly likely. 

 

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About Stephen Tromans KC, 39 Essex Chambers

Stephen Tromans KC of 39 Essex Chambers is a leading expert on the issue of climate change issues for property lawyers..

His work covers all aspects of environmental and natural resources law, both in its regulatory and commercial aspects, in cases such as judicial review, planning and other appeals, commercial disputes, arbitration, nuisance and other common law claims. It has a significant international and EU dimension.

www.39essex.com | stephen.tromans@39essex.com

 

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