Property and Commercial Law Associate Mieke Elzer recently joined Robyn Hyland for ‘Law Talks’ on Radio 4CRB to discuss the impact of record-breaking rain, fire, and flood events in Australia, and how supercell thunderstorms continue to put people and properties at risk. These issues should be at the forefront of decisions about buying and selling property in Australia.
Australia is no stranger to the devastating effects of wild weather, severe storms, flooding, and bushfires. Climate change is making extreme weather events more common in Australia.
Reports state that in 2023, several records were broken. Overall, 2023 was the 8th hottest year on record in Australia; and on a global scale, 2023 marked the hottest year.
With record-breaking rain, fire and flood events, and supercell thunderstorms putting people and properties at risk, this area requires a sharper focus for individuals considering buying or selling property in the future. These extreme weather events aren’t just news headlines – they could directly affect your property decisions.
From looking at where a property is located to historical events that could help predict future risk, there are a few things to consider when house hunting.
Key risks to consider when buying a property
There are two main issues buyers should consider when purchasing a property:
- Whether the building has suffered structural damage in a previous weather event; and
- To what extent is the property at risk of future climate-related events.
Another, less common, consideration is whether the property is likely to be affected by a weather event between the time that the contract is exchanged and the time the contract settles. Each state and territory in Australia has different rules around when the risk of the property passes to the buyer. Understanding when risk of the property falls to you is pivotal as damage to an uninsured property after exchange could have disastrous results.
Potential problems buyers may face if they miss the climate risks
Buyers must understand that any undisclosed or undiscovered structural damage caused by previous weather events will become their problem once the purchase of the property completes.
For this reason, buyers must conduct sufficient due diligence before they enter an unconditional contract to purchase the home.
In relation to the extent of risk posed to the property from climate-related events, there are a myriad of potential problems to consider. These include:
- Whether the property is insurable against flood/bushfire. Insurance companies are now refusing to insure properties in some areas that have been flood or bushfire affected, alternatively premiums in those areas have risen to a point of being unaffordable. In a worst-case scenario, one buyer was recently caught out when her and her family moved into their newly purchased home a fortnight before disaster struck and their uninsured home was inundated with floodwater.
- Home insurance affordability is another potential problem. With home insurance premiums increasing by 50 per cent in some high-risk areas due to previous climate disasters, it may be that the property is insurable but at a prohibitive price. Recent studies revealed that nearly one in eight households are currently experiencing home insurance affordability stress. Due to requirements from their lender, homeowners could be forced into maintaining insurance policies at unaffordable premiums. Other homeowners may have no choice but to abandon their insurance policies because they can’t afford it.
- The depreciating value of a property should it be impacted by an extreme weather event. To give an example, while beachfront properties are highly sought after and often come at a premium price, the astute buyer will consider whether this beachfront location may lead to a drastic reduction to the market value if the property was to be severely impacted by coastal erosion.
- Structural improvements may be required to mitigate climate risks. This may be okay if the purchaser has budgeted for these additional expenses. However, it can come as a rude shock if the property needs structural improvements, and the purchaser has not factored this into their buying price.
When should buyers insure the property?
Buyers must ensure the property they are purchasing has current and adequate insurance to protect it in the event of a natural disaster or property damage during the transaction process.
In New South Wales, the risk of the property passes on settlement or once the purchaser takes possession of the property, whichever of those things happens first. If the property succumbs to damage during this time, the vendor lodges an insurance claim, with the claim either being finalised before settlement or transferred to the purchaser upon settlement. If the property is not insured, the purchaser will have a a claim on the vendor for the cost of rectifying the damage.
In Queensland, the risk of the property falls to the buyer at 5pm the business day after the contract is exchanged. For Queensland buyers it is advisable that they take out insurance over the property immediately after signing.
Given the difference in the rules between states and territories, it is vital to know what applies to the state in which you are purchasing the property in. This can be easily overlooked when buyers are selling in one state and purchasing in another – a situation that is common for many of our clients.
What role does a property lawyer play in helping people purchasing property understand their rights and obligations and how to protect themselves from climate risk?
Property lawyers have a duty of care to advise their clients about climate-related risks associated with a property. It is a lawyer’s job to ascertain and point out whether the property is at risk of climate-related events such as flood, bushfire, and coastal erosion. Where a risk is identified, there are several searches the lawyer can order should the buyer want to learn more about the risk.
A lawyer should be asking the right questions when reviewing a contract to understand more about the client and their unique circumstances.
People purchase property for different reasons, so it is vital to understand what the client wants to achieve with the purchase and what kind of physical and financial limitations they may have. Are they purchasing the property to live in, or for an investment? Can they afford to mitigate losses if the property becomes affected by a climate event? Do they have the physical capacity to evacuate if the property is hit by flood or bushfire? Can they afford high insurance premiums? Are they looking to develop or subdivide the property in the future?
To illustrate, a property that shows up in reports as having a low risk of coastal erosion now but an extreme risk in 30 years is going to be less of a concern for a retired couple that is looking for a comfortable place to live out the rest of their lives than for a client who is looking to purchase the property as part of a long-term secure property investment portfolio.
Receiving advice from an experienced property lawyer when buying your next home is so important. With financial strain affecting many people at present, it is tempting to find the cheapest conveyancing offer around, but what this often means is the client often sacrifices that next level of advice that you will receive from a property lawyer. Overlooking potential risks when buying a property or not completing all the necessary searches can cost you significantly in the long run.
Steps to take when buying property to ensure you are protecting your best interests
When buying property, take the time to do your research and ensure you are making an informed decision. The following steps should always be taken when deciding if the property is the right choice for you:
- Complete pre-purchase searches to ascertain risk;
- Check council websites for flood and bushfire mapping;
- Make enquiries with insurance companies about premiums and whether they will cover property against flood and bushfires;
- Talk to the real estate sales agent and neighbours in the area to find out how the property faired in recent weather events;
- Consider whether structural improvements might be required and factor in the cost of these when making the offer;
- Ensure that any necessary due diligence and finance conditions are covered by special conditions in the contract.
Author’s insight: Environmental Law – protector or perpetrator?
It’s easy to sit back and blame politicians for their lack of action to radically reduce Australia’s carbon emissions. The reality is more complex and stems in fact from the ideology that underpins our modern Western Society. This ideology can be seen to be operating from what is known as an anthropocentric, or human-centred, standpoint. Whereas other legal systems, for example, those of Aboriginal Peoples of this Country, have centred around an understanding to the interconnected of humans with their environment, Western legal frameworks create a hierarchy in which humans are more important than the environment, and the needs of some humans, particularly those that hold more money, are more important than the needs of others.
Understanding this ideology one can see that our environmental laws in fact, emphasise legitimising human development other the protection of our environment. It is in this context that we begin to understand how climate-related risks have becoming such a major issue. The paradox in this, of course, is that in failing to prioritise the needs of our environment properly, our environmental laws are ultimately failing humans.
CJ Allsop’s Judgement in the recent Sharma Appeal highlighted this. His Honour’s judgement noted that the Environment Protection and Biodiversity Act, arguably the cornerstone of Australia’s environmental law framework, “is not concerned generally with the protection of the environment nor with any response to global warming and climate change.”
While one would be forgiven for thinking that our environmental law framework is designed to protect the environment. And certainly, while there are some environmental laws that seek to minimise harm against the environment, the primary goal of environmental law is to regulate the human use of resources and legitimise environmental harm.
These issues call for a shift in how we think about our environment. We must understand that the needs of the environment are intrinsically linked to the needs of humans.
Attwood Marshall Lawyers – your local property law experts
Buying a property is often the most significant investments you will ever make, and it is essential to ensure your best interests are protected, and you do your due diligence to identify any potential risks.
Attwood Marshall Lawyers has assisted buyers, sellers, and investors for over 75 years to ensure they achieve their real estate goals.
As a PEXA-certified law firm, we strive to ensure settlements proceed smoothly and happen on time, without any surprises.
Our offices are located at Coolangatta, Kingscliff, Robina Town Centre, Southport, Brisbane, Sydney, and Melbourne, so you can meet with one of our lawyers at a location near you. Our Robina Town Centre office is also open Thursday night until 9 pm and Saturday morning until 12 noon.
To get professional and prompt advice, please contact our Property and Commercial Department Manager Taylah Lein on direct line 07 5506 8208, email tlein@attwoodmarshall.com.au or call our 24/7 phone line on 1800 621 071.
