Report on Title - Commercial Real Estate

Clauses

Part A: Climate risk and climate searches

[Drafting notes: 

• Report on title or engagement letter? Check your engagement letter or terms of reference. Wording already covered there need not be repeated in the report on title, but should be included where the engagement letter is silent.
• Which section of the report on title? This wording is best used in a single 'climate risk' section of your report, but can be easily split up and included in other sections of your report (for example, searches).]

1. Impact of climate change on property: general information

Climate change is increasingly having a significant effect on real estate, not only through its physical impact such as increased flooding or subsidence, but also through transition risks (such as policy, legislative, regulatory or market changes made by governments or industries to respond to climate change). Such climate risks may affect the ability to insure, sell, let, develop or finance property, which can adversely impact a property’s value or marketability, as well as the use and enjoyment of a property, possibly even in the short- to medium-term. 

The degree to which a property may be impacted in the future by climate-related risks will also depend on factors such as its location, how it was constructed, and its use. 

[Please advise us if:

a) you have particular organisational, portfolio or asset level sustainability goals that might affect the information you require, or the actions you may take, on climate risk; and/or

b) you wish to align with industry standards such as the RICS Whole life carbon assessment (WLCA) for the built environment or the UK Net Zero Carbon Buildings Standard]. 

2. Climate searches: general information

A desktop climate search could help you to understand how climate change may impact the Property in the future. It may be a standalone search, or can be included within an environmental search. 

Unlike flood risk and environmental searches, which assess past and current risk, climate searches are forward-looking, and provide an indication of future risks posed by climate change. The search results are not guaranteed, they are limited by the data available and the quality of the models used to make predictions. However, they can provide useful information about potential risks, and investigations or advice you may wish to take.  

Solicitors are not qualified to advise on the physical risks of climate change, the technical, practical and financial consequences which may flow from them or whether further investigations are required (since this may relate to non-legal matters). We can, however, highlight certain steps you may wish to consider.

[Option 1: Client instructs solicitor to carry out a climate search]

3. Climate search results for the Property

We have obtained a climate search for the Property. We wish to highlight the following [key findings from][opinion from the search provider on] the search results: [insert]

4. Potential actions

Based on the results of the search, you may wish to seek specialist advice as follows:

• Insurance broker: your broker should consider the terms on which insurance is currently available to cover potential losses associated with climate change. As part of the process of obtaining insurance for the Property, you should disclose a copy of the search to your broker. Climate risks may affect the availability of insurance cover and your broker should ascertain if the Property is likely to continue to be insurable at commercially reasonable rates for losses arising from or relating to these risks.
• Search provider: many search providers have a helpline if you have questions on the search result; the advisers may be able to answer your questions or guide you to an appropriate expert.
• Technical experts: a suitably qualified professional such as a building surveyor, structural engineer, flood or climate risk consultant can evaluate risks identified by the search and they may also provide recommendations on possible resilience, readiness and adaptation measures that you may wish to consider. You should discuss any such advice with your lender or valuer prior to exchange. [Drafting note: see this UK Green Building Council bitesize explainer for an explanation of climate resilience, readiness and adaptation].
• Transaction documents: we can advise you on how to ensure counterparties are complying with any climate mitigation, adaptation or resilience measures you wish to take by including relevant climate-related obligations within the transaction documents. Please let us know if you would like to know more.
• Valuer [or lender]: your valuer can advise you on whether the matters raised in the search result are likely to impact the current or future market value of the Property. If so, you should discuss with them any impact on the current purchase price or any lending terms. [We recommend providing a copy of the search result to your lender.]

[Option 2: Client instructs solicitor not to carry out a climate search]

3. Climate search results for the Property

[We have not commissioned a climate search of the property, as you have informed us that [these searches have already been commissioned] [you are using separate advisers to carry out investigations in relation to environmental issues, or the impact of climate risks (including flood) on the property] [you do not want such a search to be obtained]. 

[Include where separate investigations - climate search or otherwise - have been undertaken by the client.] You should mention any separate investigations to your prospective insurer, or insurance broker, who may wish to receive a copy. Insurers may consider any climate risk adaptation measures when assessing the coverage that they will offer. You may also wish to provide a copy to your valuer or lender.

[Include where no climate investigations are being undertaken by the solicitor or client.] You confirm that you have read the information regarding climate risk and climate searches above in full and you do not wish to proceed with ordering a search or other investigations. You should consider carefully the consequences of your decision not to commission a climate search or consider other options for finding out how climate change may impact the Property. You accept that you have no recourse to us in respect of climate risk if the Property is exposed to risks associated with climate change and you proceed to purchase the Property without obtaining a climate search.

Part B: Energy Performance Certificates

Energy performance certificates: general information

Minimum energy efficiency standards (MEES) require a commercial or residential property which is rented out to have an energy performance certificate (EPC) rating of at least an E (where A is the highest and G is the lowest). If it has a rating of F or G (known as a 'sub-standard' rating), the landlord may be subject to penalties but there are certain exemptions and exceptions. 

It is anticipated that the minimum energy efficiency standards will become stricter in the future, which may mean that an EPC rating that today does not attract a potential penalty may do so in the future. 

Energy performance certificates: the Property 

The Property has an EPC rating of [●].

For properties with a rating of A to C: This rating will not currently attract potential penalties. However, you should still review the recommendations in the EPC report and consider whether you wish to undertake any works to improve the Property’s overall energy efficiency.

For properties with a rating of D or E: Whilst currently satisfactory, this rating could attract future penalties if the energy efficiency were to drop during your period of ownership or if Government proposals were to come into effect. You should review or seek professional advice on the recommendations in the EPC report and any potential costs of any required works to increase the EPC rating of the Property. You should discuss any potential impact on value with your valuer [and lender]. 

For properties with a rating of F or G: You may attract penalties if you let the Property or any part of it. You should:

• discuss any potential impact on value with your valuer [and lender];
• review and seek professional advice on the recommendations in the EPC report and any potential costs of any required works to increase the EPC rating of the Property.