Gardner Leader

NPN Insurance Matters

Gardner Leader Newbury Property News article for 2nd August 2007

Indemnity Insurance – who needs it?

If you have moved house recently, or you are in the process of moving, you may well be forgiven for thinking that your Conveyancer has turned into an insurance broker. Fiona Tighe, Conveyancing Solicitor at Gardner Leader Solicitors, noted at a meeting with clients this week to discuss their move, that no less than three different types of Indemnity Insurance Policy were required to rectify various defects in the transaction. In this article, Fiona looks at the importance of Indemnity Insurance in conveyancing transactions.

The use of Indemnity Insurance in conveyancing has become commonplace in the past few years as a means of offering reassurance to purchasers, where either the purchaser is unable to take a view on a particular issue, or where it would be time consuming and /or costly for the seller to rectify the problem by other means.

Indemnity Insurance can usually be obtained for a single one-off premium and generally has the advantage of protecting all future owners. There are three main areas of Indemnity Insurance:

1. Where we are unable to obtain confirmation of Planning Permission and/or Building Regulations for alterations or additions to a property. Where building works have been carried out at some time in the past, your Conveyancer will be looking for evidence that appropriate Planning Permissions and Building Regulations are in place. If, however, the works were carried out 20 years ago, the property is likely to have changed hands many times and this information may not have been retained with the Title Deeds, or be readily available from the Council. In this situation an Indemnity Policy can be obtained to provide cover should the Local Authority take enforcement action for failure to obtain the appropriate consents. In recent years, Building Regulations have been extended to cover minor building works such as replacement windows, electrical installations and boiler replacements. In the absence of a Building Regulations Certificate, or authorised contractors certification, such as Fensa or Corgi, Indemnity Insurance is frequently offered. It should, however, also be remembered that these certificates are evidence that works have been completed to the required standard and, even with insurance supplied, you should be satisfied as to the standard and safety of the works.

2. Insurance for a breach of covenants contained in the Title Deeds. The most common instance is where the original developers imposed a covenant that no alterations or extensions should be carried out to the property without their consent. Buyers frequently forget this condition is in their Deeds and only when they come to sell the property, having erected an extension, do they realise this covenant has not been satisfied. Providing insurance is frequently cheaper and quicker than obtaining retrospective consent from the original developer.

3. Indemnity Policy in respect of Chancel Repair Liability. Chancel searches are now routinely undertaken to ascertain if a property is situated in a parish, with a potential liability for owners of land in that parish to contribute to the repair of the parish church. If the search result reveals that the property is situated in a parish where there is a “potential risk”, it is possible to obtain indemnity insurance against such a claim.

There are several specialist Legal Indemnity Insurers on the market that are part of major insurance groups. If a policy is required, your Conveyancer will provide you with a specimen policy, quotation and statement of demands and needs explaining why the policy is needed.

Take time to read the policy and be certain that it does cover you for the risks you require. Discuss any queries you may have with your Conveyancer, who can refer them to the insurers.

The final question is of course, who will pay the premium? As a general rule, the seller who is correcting a defect will meet the cost but, in the case of Chancel Indemnity, this is frequently a matter of negotiation as it arises from circumstances beyond the seller’s control.

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