An investment in property has always been thought to be a good one. As Mark Twain put it: "Buy land. They're not making it anymore." 

However, it's a simple fact that when property changes hands, unexpected and unwelcome issues can come up, often resulting in claims risks for property professionals.

Even pre-pandemic, property deals were fertile breeding ground for claims against professionals and indeed the single greatest source of claims: whether against those advising on the deal itself (say, the lawyers, surveyors, estate agents or planning advisers); or perhaps against those who played a part in any development or construction phases.

Since Covid, the property market has remained remarkably buoyant

Covid has undoubtedly brought to bear some of the most recognised causes of stress, such as illness, income instability, or even separation/divorce, or the death of a loved one. Any one of these events might typically also give rise to the added stress of a house move. On the commercial side, many businesses have found that their needs for premises have changed, or perhaps even disappeared altogether.

At first blush, this might be of some reassurance for professionals in the property sector as it seems likely that transactions will continue. But arguably the stakes are now even higher: deals which are struck due to necessity or trauma tend to have less wriggle room and any unforeseen issues could have a significant impact on the parties to a transaction.

What can go wrong?

The list of potential problems is infinite. Boundary issues are commonplace, and a property built on the wrong footprint can present multiple issues. Those can be costly to put right, but finding a solution is often preferable to the alternative, which might be a catastrophic impact on the market value, or even demolition.

Another common failure lies in glossing over specialist issues. Take for instance the land agent who doesn't know much about maximising profit from wind farms, or the planning adviser who isn't familiar with the process for de-crofting. A discrete regulation or unidentified specific regime could significantly affect both the profitability of a project and the objective level of competence with which it is executed.

Lenders are also typically very nervous around title issues so their appetite could wane due to problems like a possible lack of adequate access or practical issues with the utility supplies. Clearly the withdrawal of funding can create significant problems in any transaction, particularly if any of the parties are in a chain. If funding is provided, then an issue which later impacts the lender's security could leave a professional adviser facing the wrath of an unhappy and well-resourced (former) client.

Issues which only become known later, say following the death or insolvency of the title holder, can introduce additional problems. For instance, if progress is stalled in concluding an estate, that could add further cost or even additional claims by disappointed beneficiaries, which could be laid at the professional's door.

These are just a few examples of the types of problems which can increase the claims risks for property professionals.

The knock-on impact can be significant

Property issues rarely go away by themselves, so professional indemnity insurers can nearly always expect to bear some pain where claims risks for property professionals come home to roost. In an already hardened professional indemnity insurance market, that can make it yet more challenging for other advisers in the property sector when seeking cover.

It follows that professionals in all sectors are under even more pressure than before, not only to deliver the right advice, but to fulfil their remit on schedule and within budget. Typically they are now also expected to do so while working from home, perhaps without (as) ready access to supervision or support and in some cases, with a toddler on the knee or a cat playing havoc with the router.

Alongside the small matter of "getting the job done", professionals must therefore also continue to focus on developing comprehensive risk management strategies. Senior stakeholders in professional practice firms should ensure that they understand the key risks.

For more information on managing claims risks for property professionals or dealing with claims, get in touch with your usual contact, or one of our professional indemnity specialists.