Climate change and liability risk – what are your obligations?

There are three different types of climate change risks:

1. Physical risks – these are the risks that climate change presents to the physical aspects of a property. This can include the physical destruction of property and increased building and maintenance costs. Physical damage can be caused by natural disasters like flooding, fires and severe storm events.
2. Transition risks – these are risks which are characterised by how the wider community, like regulators and institutions, change their behaviour as a consequence of climate change. For example, it may become more difficult to develop a property for a particular use where consent authorities have changed planning controls in light of climate change. We note that these risks are not remote, with the NSW state government making an election promise to develop a new flood planning model for Western Sydney. It has been foreshadowed that this model may include different planning restrictions on flood-affected areas.
3. Liability risks – these are risks which affect property professionals, such as lawyers and conveyancers. Specifically, a property professional will likely need to adequately advise their clients on the impacts of climate change on properties they may be considering purchasing. Failure to do so may result in the property professional facing litigation, reputational damage and/or difficulty obtaining professional indemnity insurance.