Who is responsible?

Photo by Quinn Pocock

The risks from flooding are not the only climate impacts that we as lawyers can address.  In the absence of a specific agreement otherwise, there is a range of new matters that have become relevant to the provision of competent legal advice. 

Recently a woman approached me for help.  Three years ago she had bought her first home. A solo Mum, in her forties, it was a big stretch and she had worked hard to be able to purchase.  She now sought legal help because her insurers had given notice the insurance premiums were about to double.  This was a cost she could not afford. 

Her need for legal advice was not because the premiums were to be increased per se, it was the fact no one had warned her of either the possibility of the increase or the risk that the insurer was concerned about.

The property is several blocks away from the beach.  Nonetheless she now knows it is at risk of inundation through sea level rise and sea surges.  Hence the increase in premium.

Why, she asked, did any of the many experts involved in the purchase not tell her about this problem?  Why indeed.

·        Why didn’t the real estate agent warn her of the problem? 

·        Why didn’t Council include the information in the LIM?

·        Why didn’t her lawyer tell her something about this issue?

·        Why didn’t the valuer take this into account in assessing the property value? 

·        Why had the bank not made further enquiry?

·        Why hadn’t the insurer said this was a possibility when the insurance was first put in place?

The fact the property was at risk was certainly information that was in the public domain when she bought her home.  It was just that not one of these service providers had taken the initiative to address the issue.  

It seems that, as individuals, we are almost incapable of helping ourselves when it comes to assessing and addressing natural hazard risks.   This is an extract from the regulatory impact statement prepared by the Department of Internal Affairs in November 2021.  The statement was prepared to inform Cabinet’s decision regarding proposed amendments to local government legislation.

“People have well-known cognitive biases that negatively impact their ability to make good decisions about natural hazard risk, including discounting future risk, fatalistic attitudes and ignoring risks until they have experienced a natural hazard event. There is evidence that the public is not good at incorporating risk in their property investment decisions, for example reductions in house prices in hazard prone areas have been small.”

And so we rely heavily on the expertise of others, on accurate, fulsome professional advice.

Some things have changed in the 3 years since the purchase described was made, and some of the groups of professionals involved in the sale and purchase of land are turning their minds to the impact of environmental issues on how they do their job.  The question is whether this is a widespread change of attitude at the grassroots level, or whether the gap between what some describe as good practice and what others implement as commonplace practice is becoming increasingly significant.  

 Real Estate Agents

A real estate agent is not required to discover hidden or underlying defects in land but must disclose both those defects that are known, and those that ought to be known. Rule 10.7 of the real estate agents’ code of conduct requires that “where it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects” the licensee must investigate further.  They must either obtain expert evidence that there is no defect or tell buyers about the potential risk.

This responsibility for disclosing defects that ought to be known is far-reaching and, given the availability of maps and data identifying the location of homes that are at-risk to some of the effects of climate change, would cover a responsibility to talk about inundation through storm surges and sea level rise. 

In the same way that agents now obtain LIMs prior to listing properties, best practice would have them examining maps of projected sea level rise to assess risk.

Councils - Land Information Memoranda

Rather than being a full risk disclosure document, a LIM is a compilation of information available at a given time, Nonetheless, purchasers and lawyers alike use them to identify risks that might attach to a particular property.

Risks posed by climate change are not always disclosed. Court action has meant that the fear of reprisal has inhibited the willingness of local authorities to provide the information. However, this is likely to change. Changes to the Local Government Official Information and Meetings Act will create clearer requirements to provide information about the impacts of climate change.

The Local Government Official Information and Meetings Amendment Bill is currently at select committee stage.  S44B of the Bill seeks to ensure that LIMS include understandable information about the impacts of climate change that exacerbate natural hazards.

Regional councils will be expected to share relevant information with their territorial authority counterparts to enable information to be made available to the public purchasing LIMS.

Parliament recognizes “the provision of better natural hazard information (including the impacts of climate change) on LIMs as an essential step to help property buyers understand natural hazard risk and make informed decisions when deciding whether to purchase.”  

Valuers

Perhaps 3 years ago valuers would not have turned their mind to the impact of environmental factors on value, but there are moves a foot for that to change.  At the valuers’ national conference in 2022 it was announced that the New Zealand Institute of Valuers was compiling a list of resources for valuers dealing with climate change and that guidance papers would be available soon.

In the interim, the New Zealand Property Institute, the Australian Property Institute and the New Zealand Institute of Valuers recently released an updated guidance paper for valuers considering the impact of the contamination of land. It will come into effect on 1 July this year. Whilst not binding, it sets out what the organisations consider to be best practice. It encourages valuers to consider the existence and effect of contamination and although being careful not to act outside their expertise, to recognise the potential for pollution and recommend further expert advice.

This guidance paper is not aimed at the possible impact of climate change, but it is hard to understand why a similar approach would not apply. Given scientific information is available on the likelihood of inundation from sea level rise or sea swells and given a valuer can access that information without having to draw their own conclusions on the viability of the science, it seems only appropriate that they should consider the potential risk. 

Current Residential Valuation Standing Instructions anticipate the inclusion in valuations of an assessment of risks that may impact property value.  Whilst neither sea level rise nor climate change are referred to in the instructions, specific mention is made of the expectation that any elevated risk of flood would be reported.

Lawyers

I have written before about the expectation that lawyers might consider the impact of climate change on their advice to clients.  Of course it depends on what the engagement arrangements are, and I remain of the view that it is sensible to specifically address clients’ expectations on the topic. 

The risks from flooding are not the only climate impacts that we as lawyers can address.  In the absence of a specific agreement otherwise, there is a range of new matters that have become relevant to the provision of competent legal advice.  Examples include understanding:

·        the changes in what is relevant to planning decision-making,

·        the risks of relying on assumptions that have worked in the past,

·         the costs, resources and skills required to meet emissions reduction targets.

Given recent changes to the Resource Management Act councils must:

·        when exercising their powers, have regard to the efficiency of the end use energy, (section 7(ba)) the effects of climate change (section 7 (i)) and the benefits to be derived from the use and development of renewable energy (section 7(j)),

·        when drafting plans and policy statements have regard to any emission reduction plan (section 61(2)(d) and section 74(2)(d)) and any national adaption plan (section 61(2)(e) and section 74(2)(e)) created under the Climate Change Response Act 2002.

In addition, with the repeal of sections 70A, 70B, 104E and 104F which restricted the consideration by councils of the effects on climate change of the discharge of greenhouse gas emissions, we can expect to see these effects addressed in rules and planning documents.

There will be continuing changes as decision-makers work to keep up with new criteria and standards, both in planning and more generally in the drive to reduce emissions.  These are trends that property lawyers would do well to anticipate.

 A version of his article first appeared in The Property Lawyer and is published with the consent of the NZ Law Society, Property Law Section.

 © Debra Dorrington 2023.