The Risk of Repossession in Flood Plains

By January 20, 2012House Repossession

UK areas at risk of floodingAs if there wasn’t already enough for homeowners to worry about, This is Money today reports that, if you live in one of the designated UK flood plains you face higher risks than most of having your home repossessed.  More specifically, the site claims:

“More than 200,000 homeowners who live in flood-risk areas face the threat of repossession because of a stand-off between the Government and insurers.”  The reason being that an agreement currently protecting homes built in these area will not be renewed in 2013.

Under the current agreement, insurance provide cover for the thousands of homes built in high-risk flood areas as long as DEFRA (The Department of Environment, Food and Rural Affairs) keeps up its investment in flood defences.  However, according to the Association of British Insurers (ABI), DEFRA do not plan to renew this agreement when it runs out next year.  This, of course, will render these properties uninsurable, other than by taking out hugely expensive policies with payments or excess levels set ridiculously, and probably unaffordably, high.

If buildings are uninsured, the mortgagee is technically in breach of the loan agreement, rendering him or her liable to repossession.  ABI are calling for government agreement to pay the insurance for those properties deemed most at risk but, thus far, there has been no commitment from DEFRA.

Not only will this cause enormous hardship for those affected home owners, but the likelihood is that flood plain areas will become like the ghost towns seen in some northern towns and cities, with shops and properties lying vacant because they become uninsurable or unsaleable.

Already some major insurers refuse to provide cover for previously flooded homes – Direct Line, for instance, will not provide insurance cover on a home that has been flooded within the past ten years.

Oh dear, if it’s not one thing, it’s another…