Indemnity insurance for property owners

We have previously written to advise to home owners preparing for sale. As mentioned, the key is to keep full and complete documentation and, in particular, in relation to works done to a property.

However, it is not unusual for works to be carried out without the requisite planning , building regulation consent, conservation area consent or self certification (in the form of a gas safety certificate or Fensa certificate for instance).

In those circumstances, the buyer (and more particularly their lender) may be prepared to proceed if Building and/or Planning Regulations Indemnity Insurance is obtained. Indemnity Insurance will cover the buyer against the risk of enforcement by the relevant authority and is often sufficient to allow the transaction to proceed.

However, it provides no guarantee as to the workmanship

There are also other types of Indemnity Insurance which can be taken out to allow the sale of a property to proceed where the documentation is not in order. These include:-

  1. Absence of Easement Indemnity Insurance:

In our previous article we referred to private water and drainage supplies. The property that you are buying could also benefit from a right of way over adjoining property. Again, it is not unusual for such rights to have arisen over time and by way of custom rather than being formally documented within the Title Deeds.

In such circumstances this Insurance can be provided to cover the risk (and associated costs) of being prevented from using the supply or the right of way in question.

2. Restrictive Covenant Indemnity Insurance:

It is not unusual for the Title Deeds to contain restrictions on the use of the property. A seller may have inadvertently breached such a restriction and therefore, there is a risk that the person with the benefit of the covenant might seek to enforce it.

For example, there may be a restriction against erecting any buildings in the garden and the seller has erected a greenhouse. Restrictive Covenant Indemnity Insurance will cover the risk of such enforcement.

3. Involved Flying Freehold Insurance:

A flying freehold may occur when part of one property is built on part of a property owned by someone else. So, the result would be that the upper property does not own the building or land underneath the “flying” part.

Some lenders will not accept flying freehold as security for a mortgage because of the risk that the lower owner fails to maintain and repair its property which may damage or prejudice the structure on which the “flying” part physically rests. Flying Freehold Indemnity Insurance is available to cover this risk and is often accepted by most lenders.

4. Chancel repair insurance

Your property may be subject to a liability which could require the home owner to contribute towards repairs to a local chancel. This can potentially be a costly liability.

The law has changed on this somewhat in that a buyer will take free of any such liability if it buys a property which has been registered at the Land Registry since 13 October 2013 and does not have a notice on the registered title referring to the liability.

Of course, many properties have not been purchased or voluntarily registered before 13 October 2013 and, therefore, the risk may still exist. It is possible to carry out a search against the property but the cheaper option is to obtain Indemnity Insurance to cover against this risk.

Other forms of Indemnity Insurance are also available and our expert property lawyers will discuss your options as a means of potentially rectifying defects in title.

Published 1 February 2019

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