A guide to help answer questions about Indemnity Insurance.
What is Indemnity Insurance?
Indemnity Insurance is used in conveyancing to offer sellers protection if there is a defect with their property. Sellers take out a policy to cover any costs from the buyer, making a claim against their property. There is usually only a one-off fee payment, and this insurance lasts forever.
Buyers can also purchase Indemnity insurance as another way of rectifying defects in a property. This insurance means that the buyer won’t need to ask the seller to fix defects; this means that the mortgage is likely to go through smoothly.
If there is a loss in the value on the property as a result of the defect, the Indemnity Insurance will cover the buyer and mortgage lender in the future.
An indemnity insurance policy protects you from a specific potential problem with a property that could cost you in the future. For example, if you are buying a property and the seller can’t provide a building regulation certificate, then your conveyancing solicitor might suggest taking out an indemnity policy to cover potential costs. This insurance will then cover any costs in the future if your local authority pursues a claim because you don’t have the certificate.
“It is important to note here that indemnity insurance does not cover the cost to repair or replace something.”
What does this type of policy cover?
Insurance policies cover a whole host of risks, even missing regulation certificates and incomplete installation certificates. Here are a few most common policies.
Planning permission – perhaps planning permission was obtained, but there is no evidence to prove it, or maybe planning wasn’t complied with.
Missing Particulars – If deeds or documents to a single residential property are entered with the land registry but have not been supplied or are missing and that may contain unclassified matters then this policy is the one to take.
Building Regulations – This covers missing regulations paperwork, and this type of policy would cover the cost of rectifying unregulated work.
Restrictive Covenant – If the title of the property contains a restriction or restrictions on a building extension, this policy covers the cost of legal expenses and loss in property value due to this breach.
Absence of easement – This covers access rights, e.g., drains that can only be accessed by your neighbour’s gardens. If the neighbour obstructs access from you, then this policy will cover your legal costs in making claims on this.
Indemnity Insurance for Windows on a Property
When a property is fitted with new windows a FENSA certificate would have been issued, if this is missing an indemnity policy will cover the cost of a local authority taking enforcement action against you because the windows do not comply with building regulations. So, although the policy won’t cover the cost of new windows, it will cover you from any action an authority may take against you.
Indemnity insurance for a boiler
If you are selling a house and can’t provide an installation certificate for your boiler, you could get an indemnity policy to cover it. However, you may want to consider getting a gas safety certificate first – this will give more practical reassurance to your buyer about the safety of the boiler and avoids you having to pay out for indemnity insurance. Equally, if you are buying it is important to ensure the boiler is safe. Don’t just accept an indemnity policy instead. Indemnity insurance will not cover the cost of repairing or replacing the boiler.
If the seller of a property has an indemnity policy in place, it can be passed onto the new owner.
What to do next
Our legal team can help guide you as to whether you will need this type of insurance, in most cases, it is easily resolved, especially if the buyer is confident in attuning this type of insurance.
In practice, building regulations indemnity insurance is very rarely claimed on, and some people question how useful it really is (it wouldn’t, for example, cover the cost of putting any work right). Many people agree to buy a policy so that the house sale can progress.
If you’re selling a property, you may find that the buyer’s solicitors and the mortgage lenders insist on an indemnity policy being in place before the sale can go ahead.
These are just some examples of policy under Indemnity Insurance. These policies can range from £20 – 500 depending on the value of the property. Some solicitors charge an additional fee for set up costs.
Buyers will often pay for this type of insurance which means selling to a cash buyer can be an easy way of selling your property. Mark King Properties are well equipped with knowledge about indemnity insurance and therefore despite the potential issues a property may have (some are mentioned above) can easily purchase the property, making your sale faster and smoother.
Here at Mark King Properties, we can help advise steps that you might need to take if you are concerned about anything mentioned above. 9/10 times we can purchase your property despite any concerns on the background of the property that you are trying to sell.