As the UK clocks up another year of record-breaking temperatures and rainfall, the urgency of climate change is growing ever more apparent for real estate professionals across the board. Property is a major contributor to the global emissions at the heart of the crisis, but it is also a sitting duck for its physical impacts, such as heat stress, subsidence, erosion and flood. In this context, its affect on the legal professionals advising on property transactions is gaining sharp focus, and the Law Society has launched a consultation on a new practice note that will change the way legal advice is routinely given.
The UK was the first jurisdiction to put what are colloquially known as net zero emissions targets on a legislative footing, with the Climate Change Act 2008. In 2016, we ratified the Paris Agreement to the United Nations Framework Convention on Climate Change, publicly committing to policy that would hold the increase in global warming to “well below 2°C”, and ideally a maximum of 1.5°C above pre-industrial levels.
In the years since, however, there has been little by way of top-down regulation to mandate achieving this staggeringly complex and ambitious goal. No surprise then that many professions and supply industries within the real estate sector have been working hard, bottom-up, to understand, manage and mitigate the impacts of climate change.
Law Society commitments
The Law Society was the latest in a long line of professional bodies to articulate its commitment to change with its Climate Change Resolution in October 2021. This resolution was an early signpost to change afoot in legal practice. In it, the Law Society promised to “develop plans and take rapid action, in a manner which is consistent with restricting global warming to 1.5°C, by adopting science-based targets”. With a clear eye on its representative role, it planned to urge “solicitors, always in a way which is compatible with their professional duties and the administration of justice, to engage in climate-conscious legal practice”.
But lawyers are nothing if not sticklers for detail. And so the profession largely waited for a deeper understanding of what, exactly, might constitute climate-conscious legal practice before jumping in at the deep end and reporting climate information to clients who weren’t, truthfully, asking for it.
On 19 April last year, the Law Society published detailed Guidance on the Impact of Climate Change on Solicitors, clear in its conclusion that the whole legal industry would need to place both its office practices and its transactional advice in the context of climate change. The guidance note covered generally both the climate impact law firms have as entities in their own right (with the potential for sustainability-improved corporate practice) and the advice they give to clients.
Here was something more concrete for the lawyers. This note covered some basics, such as the scientific language of targets and goals (explaining the nature of “advised” or downstream emissions, for example). It also gave advice on identifying physical and transitional climate risks in the real world. This was necessary to get the profession on the same page but, importantly, it also considered the potential for expanding professional duties; stretching them to accommodate some necessary climate change advice. In this, the guidance note heralded transformative change in a legal sector that was thinking about climate change solutions. Strategies will of course vary dramatically depending on the size and client base, but in June 2023, for example, the first eight members, including Taylor Wessing LLP, signed up to the ambitious Legal Charter 1.5 initiative. Groups such as the Chancery Lane Project have meanwhile argued compellingly for years that even small legal drafting solutions can change our (inter)national response to the crisis from the bottom up.
The guidance note was broad brush in its application to all practice areas, but it promised sector-specific guidance where help was needed on that issue of expanding legal risks and professional duties around climate change. And this was clearly needed urgently in the real estate arena, where all the assets we buy, sell and manage at any level might be at the coalface when it comes to the very real impact of climate change, whether residential or commercial. Just as a multi-million-pound commercial retail park might be plagued by flooding and insecure supply logistics, so might a cliffside bungalow fall into the sea with coastal erosion.
New practice note
Specifically, the more detailed guidance will be in the form of a new climate risk and conveyancing practice note, designed to complement existing practice notes on flood risk and contaminated land. This will be aimed at real estate solicitors across England and Wales. On 19 September 2024, the Law Society launched a consultation on its work to date.
In its current form, the practice note is the result of considerable work with conveyancing and environmental experts and other interest groups, such as local law societies. Designed to support best legal practice and ensure clients receive the best focused advice, it contains three sections:
- Understanding climate risks. The first section aims to explain the detail of how physical risks, transition risks and liability risks might affect a conveyancing practice.
- Solicitors’ duties and advice. The Law Society remains a representative body, aimed at supporting its members not regulating them. However, while the Solicitors Regulation Authority remains quiet on the issue of expanding professional duties, it seems very sensible to expect that climate change will interface with what is expected on any standard conveyancing transaction. It was ever thus, that legal duties would expand dynamically to respond to the changing world. Indeed, former secretary general of the Law Society, Sir Thomas Lund, noted in 1960 that “global social issues interact with these solicitors’ regulatory duties and the way the regulator enforces those duties”. And so, assuming professional duties will demand consideration of climate change, the guidance sets out information on the scope of the retainer in engagement letters, how to understand lender requirements and what to do if a client refuses to undertake a climate search.
- Acting for the client. The point of this section is, fundamentally, to ensure that real estate lawyers are able to incorporate climate risk into their advice without adding significant complexity or cost. The correct advice will ensure clients are better able to understand and navigate climate change risks, and it will necessarily be given in the context of the client’s risk appetite, insurance, capacity for adaptation and plans for the asset. The practice note will cover pre-contract enquiries, physical surveys and how practitioners might get to grips with that burgeoning commercial market of climate searches, as well as what exactly they need to do with the contents of such a search. Specific client scenarios, such as acting for lenders or on capital value lease purchases, will also be considered.
Moving forward
Across a relatively short 25 questions (24 once you have filled out your name), the consultation aims to gather feedback that will enable the resulting practice note to equip practitioners with the knowledge and tools they need as they start to explore the impact of climate risk on their client’s deals.
Some of the questionnaire is clearly looking for a state-of-the-nation glimpse at current practice. It will be interesting then, after 31 October 2024, when the online consultation closes, to see where the majority of real estate practitioners fall today on the spectrum offered by questions such as “Do you consider climate risks to be important in property transactions?” and “How often do you currently discuss climate risks with clients during conveyancing transactions?”
But in keeping with the Law Society’s guidance note conclusion, that we lawyers will likely have to place every instruction within the context of climate change, the majority of questions are really trying to understand not if but how real estate practitioners in England and Wales might best handle climate risks in their practices, with a view to ensuring the scope of the proposed practice note is comprehensive and useful moving forward.
Click here to view the Law Society’s consultation
Clare Harman Clark is senior counsel – knowledge at Taylor Wessing LLP and chair of the property section at the Law Society
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