During conveyancing, the legal process of buying and selling a property, checks are carried out by the buyer’s solicitor to make sure there are no major problems with a home. Sometimes it’s not possible to verify whether an issue has been resolved in the past. In this case indemnity insurance can be bought to protect the buyer and reassure their mortgage lender.
Investigating your next home
A buyer’s solicitor or conveyancer will conduct local authority searches during conveyancing that will reveal various things. These include if there are any restrictive covenants attached to a property – which prevent you from using it in a certain way – planning permissions that have been granted, listed status, local development plans and so on.
Your conveyancer will also send the sellers a property information form asking them about their home in detail. This includes whether buildings works have been carried out and if they have the relevant paperwork. On top of this most buyers will commission a survey to assess the condition of a home.
All these checks are designed to give the buyer a full picture of their next home and raise issues that require indemnity insurance.
What does indemnity insurance cover?
It is designed to cover issues that could potentially be very costly, but are very unlikely to happen. For example a seller may not have a particular piece of information or documentation needed to put a buyer’s mind at rest. Indemnity policies provide protection in these situations, covering issues such as:
- Planning permission – if building work has been carried out but necessary planning permissions and building regulations haven’t been granted, this would cover a homeowner if they were forced to make changes to their property to comply with either.
- Restrictive covenants – a former owner may have breached a covenant that is on the title deeds of the property by changing it in some way. Or a third party may have historical access to a part of your property, even if they do not use it. Insurance will protect you if these cause problems in the future.
- Windows and boilers – windows fitted since 2002 must have a FENSA certificate to show they comply with building regulations. If they don’t the local authority could force you to replace those that do not comply. Similarly, if you do not have an installation certificate for your boiler indemnity insurance will cover the costs if the local authority forces you to remove it.
There are lots of other situations in which indemnity insurance can be useful, such as if you can only get to your home via somebody else’s land. Insurance will protect you against the costs of resolving this if it becomes a problem.
Costs and who pays
Because indemnity insurance is so specialised a conveyancer will buy it for you. Usually the seller’s conveyancer will buy it and the seller will pay for it, especially if the seller does not have the correct documentation for work they’ve carried out. However in some circumstances they may ask a buyer to contribute, for example if it relates to a historical right that hasn’t been problematic for previous owners..
Costs can range from as little as £20 for a window indemnity insurance policy to hundreds of pounds for those covering building works. They will also vary depending on the size and value of your home.
The good news is each policy stays with the house, which means it should only need to be bought once and is handed over to the next owners.
Pause before you buy
Indemnity insurance can be a good way to quickly resolve situations in which it’s impossible to get hold of the information you need, or would be prohibitively time consuming and expensive to do so. But that doesn’t mean you should immediately agree to a policy suggested by your solicitor.
If the policy is cheap it is probably worth having either way. However for more costly policies it’s worth questioning your solicitor and possibly doing some of your own research. For example ask your conveyancer when building works were carried out, they may have been done before building regulations were applied to extensions.
Similarly local authorities have only four years from the moment building works started to enforce a retrospective planning order, so it’s worth checking they do not fall outside this period. However if the works have been concealed that four years begins the moment they are uncovered. You can search for planning permissions yourself if you’re keen to double check.
For items such as boilers, a thorough safety check by a qualified gas engineer may set your mind at ease if there is no installation certificate.
Reducing legal costs
Indemnity insurance is just one of the many costs of conveyancing sellers will need to pay. In addition to estate agent fees it makes selling a home an expensive process. It’s one reason many people choose to work with us.
Not only do we buy house quickly without the need for estate agents, we instruct and pay for solicitors too. We’re also experienced at dealing with sensitive home-selling situations such as those involving divorce or inheritance. In unsettling moments like these, if you’re selling your home on the open market, you may be tempted to take out costly indemnity insurance to resolve issues quickly and speed the process along.
If you think we can help you, we’d be happy to chat about the service we offer.