Indemnity Insurance Explained
Askews Legal LLP are a firm of Solicitors in Coventry who have a dedicated residential conveyancing team that are experienced in dealing with indemnity insurance policies and any issues, which may be flagged up during the conveyancing process.
When you are buying a property your solicitors will review the contract documents they receive from the seller’s solicitors. During the process of reviewing the documents the solicitor may discover that certain works have been carried out at the property such as an extension, or the installation of new windows and doors or the installation of a boiler. The solicitor will check if appropriate building regulation approvals or compliance certificates were obtained.
If after making enquiries it comes to light that the seller is unable to provide these documents or did not realise that they were required, an indemnity insurance policy is a quick and sometimes cheaper alternative than trying to obtain retrospective consents or certificates where a defect cannot be resolved.
An indemnity insurance policy is essentially a type of protection offered to the buyer and is seen as an alternative to fixing the actual problem. It is a policy that can be passed onto future owners and as it is tied to the property it is a one-off policy. If you are buying the property with a mortgage the policy can also cover your mortgage lender. Such a policy does not provide a remedy to put the defect right. It provides protection if there is a problem with the property that could result in the local authority taking legal/enforcement action in the future.
Why may a policy be required?
The most common reasons a policy can be taken out is for missing planning or building regulation approvals, missing certificates for replacement windows also known as FENSA certificates, or certificates for the installation of gas fires/boiler or electrical works.
Sometimes with older properties issues can arise such as access rights over the property or neighbouring properties and where no formal deeds exist or are missing. Sometimes the property may be subject to restrictive covenants that limit the use of the property and the covenants are unknown. Such a policy can protect the owner against any future claims even if the covenant has already been breached.
Most issues can be covered by indemnity insurance. Some companies will offer bespoke policies to cover complex issues outside the normal ones mentioned above.
How much does a policy cost?
The cost of a policy varies quite considerably and depends on what the defect is and what type of protection is required. A policy for the lack of building regulation for windows or a boiler can be as little as £20. However, where a policy is required for missing deeds or building certificates or a bespoke policy is required the cost could run into hundreds of pounds.
Unfortunately Indemnity Insurance is not a policy where you can search for the cost on a comparison website like you would for house/car insurance. This type of insurance can only be offered by specialist providers.
Here at Askews Legal we can research the type of policy you will require and we can obtain quotations on your behalf.
Who should pay for the policy?
This is arguable, however a purchaser will feel that the seller should provide the policy, as they cannot provide the necessary paperwork needed. Also when a policy is taken out the insurer requires certain declarations to be made, which can only be made by the current owner. It can also be argued that the seller should provide the policy as the buyer is responsible for any increased premium when they sell the property in the future if the property value increases.
Important Note
Most policies contain a clause that a policy is only valid provided no contact has been made with any third party such as the local authority as this will invalidate the policy. It is important to note as this applies to both you and the seller.
If you are thinking of selling or buying a property, please contact our highly experienced Residential Conveyancing Team at Askews Legal LLP in Coventry or get an instant no obligation conveyancing quote.
