The time between exchange of contracts and completion day can be daunting, with the chance of being gazumped by another buyer still possible. Many buyers and sellers take out the insurance to help speed up that time without having to delay the process by searching for missing documents or solving issues with planning permission.
Talk to your solicitor or conveyancer about indemnity insurance as they will be the one to provide you with a quote for your policy. Who pays for indemnity insurance will depend on your circumstances and is usually up for negotiation. As the insurance policy will benefit the buyer because they will be the new owner of the property, some argue that the buyer should pay for indemnity insurance and add it to their total cost of buying a house.
If the seller is at fault regarding the issue with the property, they will feel the need to pay for the insurance. If the seller already has taken out an indemnity insurance policy on the property, then it is valid for you to use. Whilst there is no charge to transfer the policy to you, if the property value increases, you might have to pay more towards the insurance policy to ensure it covers everything needed.
Your conveyancer or solicitor will suggest whether you need to get indemnity insurance depending on your situation. Whilst your conveyancer will know best, it is entirely up to you whether you take out the policy or not. Subscribe to Our Newsletter. Related Services Residential Conveyancing. What is an indemnity policy?
When is an indemnity policy needed? Other common policies include: Restrictive covenant: required when the title of the property contains a restrictive covenant which has been breached Missing information: required when important documents containing unknown restrictive covenants or restrictions has been lost Absence of easement: required when no legal rights of way, or rights to connect into services, exist Absence of build over agreement: required when the Local Authority's consent has not been obtained for building works to be erected over a sewer or pipe This is not an exhaustive list and many other indemnity policies are available.
What is the benefit of taking out an indemnity policy? Points to note Where an indemnity policy is being sought to cover against approval for works carried out at the property, it should be noted that although the policy will cover against the costs involved in any third party making a potential claim, this does not insure against the quality of the works.
There's a four-year limit on enforcement. In these cases, indemnity insurance is more appropriate than the seller trying to retrospectively satisfy planning conditions for a loft conversion or extension.
Indemnity insurance is no guarantee of the quality of the work. Restrictive covenants are provisions written in the deeds of a property that limit its use in some way — for example not to erect outbuildings. If the breach has been in existence for some time, indemnity insurance can allow a house sale to go through. There may be conditions to the insurance, such as no current disputes ongoing, or the breach being committed a certain time ago.
Indemnity insurance for an absence of easement will cover the cost of establishing easement, or the loss of value if access ever becomes an issue. Sometimes, where a gifted deposit is required, a conveyancer will ask for indemnity insurance. All indemnity policies contain a clause that the insurance will be invalidated if the existence of the problem is revealed to third parties.
In practice, this usually makes it impossible to remedy the reason for taking the insurance without invalidating it. For example, if you had indemnity insurance for an extension built without planning permission and then sought to obtain retrospective planning permission you would invalidate the insurance. Even if planning permission was denied. There are many reasons why an indemnity policy could help you.
Here are some examples:. Building regulations. An indemnity policy could cover costs that might arise if your local authority made a claim. Planning permission.
An indemnity policy could cover you for any future costs associated with this. Absence of easement. It could cover the costs that might arise if the land owner stopped your access. Missing particulars. Sometimes, a property might have important elements like deeds or Land Registry documents missing. Indemnity insurance would protect you against any issues that came up in relation to this.
Chancel Repair Liability. This means that you, along with other properties within the boundary, could be liable to pay the costs of repairs to the church. Restrictive covenant.
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