Flooding – who is responsible?
Parts of Oxford Street were brought to a standstill on 19 January (2012) when a Thames Water burst water main caused havoc, a number of shops had to shut and stock was damaged.
Further, the cost of obtaining insurance cover for natural flooding is becoming more difficult and expensive and looks set to get worse.
This article looks at the issues landlords face in dealing with flooding, either by burst water main or natural causes (river, coastal, groundwater, and surface water) and how these can be dealt with.
Burst water main
The recent burst water main on London’s Oxford Street caused huge difficulties to the affected retailers in already difficult trading conditions. Water companies are responsible for the supply of water up to and including the stopcock of properties. Therefore, if there is a burst water main in the road, as in this instance, it will usually be the water company’s responsibility and they will be liable for the damage caused. Shortly after the burst water main on Oxford Street, Thames Water released a statement confirming that they have put the affected retailers in touch with their loss adjustors.
Tenants will firstly be looking to recover the cost of the physical damage, being the cost of spoiled stock and of repairing the damaged premises. Fortunately in the Oxford Street example, most of the damage was at the basement level, so most of the shops were able to continue trading.
We would advise landlords that if there is a burst water main that causes flooding to one of their properties to notify the water company immediately so that they can minimise the damage and deal with any potential claim for damage to the premises.
Unfortunately, where flooding is caused by natural causes, for example, if there is extremely heavy rainfall or a flooding river, there is nobody to blame and therefore nobody to claim against.
Flooding is the biggest natural disaster that occurs in the United Kingdom and obviously some areas are at particular risk. The scenes from Cockermouth in December 2009, where water levels got up to 8.2 metres, show the extensive damage that flooding can do.
Landlords should ensure that flood damage is included in their buildings insurance cover. If their property is damaged by flooding, they will need to claim for the cost of repairing and rebuilding it. Further, most leases will include a suspension of rent and possibly service charge for tenants if there has been damage by flooding. Landlords should ensure that their insurance covers loss of rent and that the cover matches the period of rent suspension in the lease.
Flood damage insurance may not always be readily available or maybe too expensive, particularly in areas with a higher risk of flooding. Landlord’s can check if they are in a flood risk area by undertaking a cheap and quick ‘flood risk’ search. If cover is unavailable, landlords should check their leases to determine whether they must always provide cover for flooding, or whether there is a “get out” if it is not available or too expensive. They should also check the repair and insurance covenants to determine whether it is the landlord or tenant who is responsible for repairing the damage.
When entering into new leases in high-risk areas, landlords should consider how the risk of flooding is to be shared between the landlord and tenant. If the landlord is not required to have flood damage cover, prospective tenants may well want a carve-out in their repairing covenant, so that they do not have to repair the premises if there is flood damage, a rent suspension, and a break clause if the damage is not repaired within a set time period.
People in areas with a high risk of flooding should take particular caution, as a Statement of Principles for flood insurance between the insurance industry and the Government comes to an end in June 2013. This agreement prescribes that insurers must always include flood cover as standard for domestic properties and small businesses in low-risk areas built before 1999 and allow such properties in higher risk areas who already have flood cover to automatically renew this with the same insurer.
The Association of British Insurers has recently confirmed that they will not be renewing the Statement of Principles. There is a considerable political background to this decision, but the main reasons appear to be that they do not feel that the Government has done enough to improve flood defences and that having to provide or renew cover is driving insurance premiums upwards. The Statement of Principles comes to an end in June 2013 and may move to a more ‘risk-based’ approach.
If the damage is caused by a burst water main, the landlord should contact the relevant water company as soon as possible. For flooding arising from natural causes, it is becoming more and more difficult and expensive to obtain insurance cover for flooding. In areas at particularly high risk, landlords should ensure that they will be able to obtain flood cover and should check the terms of their leases if not.