Wildfires and Climate Change – The New Normal? #561

With the increased frequency and severity of wildfires, flooding, heat domes, and atmospheric rivers in British Columbia over the past decade, climate change is having real-time effects on real estate transactions for REALTORS® and their clients.

Wildfires

We’ve all been watching the wildfires in Alberta these past couple of weeks with bated breath, knowing B.C. is likely in for a significant wildfire season this summer. Wildfires have the potential to impact the completion of real estate transactions. One of the largest issues for completions is the inability of Purchasers to obtain and bind an insurance policy if they are purchasing a property within 25 km - 100 km (depending on the insurer) of a fire of note or close to an out-of-control fire or active fire, or within an alert or evacuation area. The inability to obtain insurance impacts mortgages, with lenders refusing to advance mortgage funds without satisfactory home insurance in place. This can put purchasers in a tricky position where they may not be able to close on their purchase and risk losing the property, their deposit, and being sued for damages in excess of the deposit.

So what can be done to mitigate these issues? Firstly, REALTORS^® should advise their purchasers to consult with their mortgage company to ensure a comprehensive understanding of any funding requirements that could potentially impact the transaction.

Secondly, buyers should be advised to seek independent legal advice and guidance specific to their transaction, including tailored clauses and terms that help protect their interests. Finally, REALTORS^® working with buyer clients can help safeguard them by inserting subject clauses favouring the buyer's ability to obtain an adequate home insurance quote.  Furthermore, they should encourage clients to discuss binding policies with their insurance companies as soon as possible in the transaction (ideally before or in conjunction with the subject removal).

When representing sellers, it’s necessary to advise your clients to maintain their existing insurance coverage until after completion is confirmed in case the deal collapses. You don’t want your seller to be left without home insurance during wildfire season, as they may be unable to bind a new policy. .  In cases where sellers encounter unfamiliar clauses or terms in their contract, they should be advised to seek independent legal advice to help ensure that sellers clearly understand the implications and ramifications involved.

Climate change

Weather trends have changed, and extreme meteorological events such as heat domes, atmospheric rivers, flooding, sink holes, and erosion significantly impact real property. Whether it be damage to the exterior or interior of homes, or erosion of land, considerations need to be given on how best to help protect your client’s interests.

Reviewing charges on title and due diligence

Now more than ever, reviewing charges on title to properties and proper due diligence is essential. Many titles throughout B.C. have covenants registered on title which describe the potential for flooding or geotechnical events. These covenants should not be brushed aside but rather should be reviewed in detail and considered. At times, the advice of other professionals, such as geotechnical engineers, may be required. For example, many property titles in B.C. have geotechnical covenants registered against them, which specify the standard at which construction needs to be done, and they often include geotechnical reports outlining risks and requirements for mitigating these risks.

Municipalities are also a good source of information, as they produce many reports regarding flood zones, areas prone to landslides, or how earthquakes will affect different areas.

Property risk mitigation

REALTORS® should also become familiar with home features that may reduce the affects of climate change, such as fire smart yards and building materials¹, location and proximity to natural features, and geography, which can pose risks down the road. In more rural areas, access to sustainable sources and supplies of potable water and proximity to fire protection services will become increasingly important.

REALTORS® need to be aware and consider how wildfires and climate change may affect transactions and their client’s property interests.

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	1	Fire Smart BC

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