We highlight the impacts of Japanese knotweed to buyers, sellers and lenders in UK property transactions arising from the House of Commons Science and Technology Select Committee's 2019 report (the 2019 Report). We also consider the latest findings released by Defra (Department for Environment, Food and Rural Affairs) in September 2020 (the Defra Report) on the international approaches to Japanese knotweed.
Untying the knot - a key change in approach
Japanese knotweed, an invasive plant that is notoriously hard to remove, has gained a lot of bad publicity due to its perceived damage to property. Lenders are reluctant to lend on property effected, the value of properties are affected by it and potential nuisance claims (where it affects neighbouring land) have increased.
However, one key finding from the 2019 Report was that the significant negative perception knotweed currently has may be disproportionate to the actual physical damage it causes and as such the current legislation, guidance and perception may need to change. This question of proportionality was further considered by the Defra Report.
Physical harm – no greater than other invasive plants
The 2019 Report found that the physical effects and damage Japanese knotweed causes to property is no greater than that found from other invasive plants and trees. Despite similar levels of damage, other invasive plants and trees have much less regulatory control surrounding them and therefore have less of an impact on property values. Some experts argue that reactions to the presence of Japanese knotweed should be in proportion to the risk.
There are also significant gaps of knowledge regarding the physical effects Japanese knotweed has in built up areas. The 2019 Report suggests the Environmental Agency should approach major remediation companies to pool all knowledge into assessing the exact problem and extent of the physical damage Japanese knotweed has in specific situations. The 2019 Report also recommended Defra commission research to fill gaps of knowledge in the physical effects of Japanese knotweed.
The Defra Report, released on 1 September 2020, focused on the international approach to Japanese knotweed in the context of property sales. It found many international countries do not place a great emphasis on whether knotweed affects a property and that lending decisions do not take knotweed into account. However, it noted that the levels of regulation adopted in the UK was not disproportionate to the effects of Japanese knotweed. The Defra Report highlighted the new addition to the Property Information Form (TA6), namely the ‘not known’ category. This caters for the uncertainty surrounding the eradication of Japanese knotweed in order to reduce claims of liability and wrongful disclosure. It is essential that parties to property transactions keep up to date with the latest guidance so there can be clear evidence based risk communication on the effects of Japanese knotweed.
Japanese knotweed is still much harder to eliminate than other invasive trees and plants. Two of the main methods to clear it are treatment with a herbicide and excavation. Both have their own flaws.
Herbicide treatment can leave the rhizomes (the roots of Japanese knotweed) dormant, only to grow again in the future. A full herbicide treatment plan can take three to seven years. There is a risk that excavation will not eliminate all rhizomes. If even the smallest amount of rhizome remains after excavation, this can then take hold and grow back. Nuisance claims from rhizomes encroaching onto other land, difficulties with on site development and disposal issues all add to the general stigma and potential reduction of property value.
TA6 Form – addition of ‘not known’ category
The TA6 Form allows a potential buyer to ascertain important information on a property. The form asks whether Japanese knotweed is present. Previously, the form had a ‘yes’ or ‘no’ answer only but following the 2019 Report, there is now an opportunity for the seller to say ‘not known’.
In February 2020, the Law Society released their explanatory note which states ‘If No is chosen as an answer the seller must be certain that no rhizome (root) is present in the ground of the property, or within three metres of the property boundary even if there are no visible signs above ground.’ The guidance also says ‘additionally even if no above knotweed growth is visible, do not assume that physical excavation or remediation of Japanese knotweed rhizome (root) has or will result in complete eradication’.
Is the lending framework in knots?
Lenders are reluctant to lend on properties affected by Japanese knotweed and evidence of a remediation plan with an insurance backed guarantee are often required. HSBC bank commented in the 2019 Report, saying ‘so long as the public’s negative perceptions of Japanese knotweed remain, this must necessarily be adequately reflected in policy’, so highlighting current prevalence public perception has in relation to Japanese knotweed and lending decisions.
It is notable that the Defra Report found that lenders’ decisions to lend on property affected by knotweed, in other international countries, are not effected by its presence. This disparity between lending approaches does fuel the argument of whether the UK approach is current and proportionate to the effects of knotweed.
Every lender has a different commercial approach but some have used the 2012 RICS Information paper on Japanese knotweed to base their decisions on lending to properties affected by Japanese knotweed. The categories are based upon a ‘seven metre rule’ with category 1 being the lowest risk and category 4 the highest risk.
The 2019 Report criticises the framework and the seven metre rule, describing it as a ‘blunt tool’ and that ‘a more nuanced and evidence based approach is needed’ when determining the risk to lenders. The framework does not take into account matters such as the size of the infestation, the type of property, the exact distance of the plant from the property and its potential to damage the property. The seven metre rule has also been called into question with RICS being asked to update its framework and policy to make sure it is up to date with the most scientific based research. Further comments from RICS are awaited.
A scientific consensus combined with pooling evidence from remediation companies should help to provide more clarity as to the extent and impact of Japanese knotweed. If this is then reflected in legislation and supplemental documents such as the TA6 Form and guidance and the RICS framework to lenders, this will provide more clarity and certainty to ensure a proportionate approach to Japanese knotweed.
Until a universal consensus is reached, all parties to property transactions and the resulting public perception will remain cautious. So, in the meantime, buyers and lenders alike beware.