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If your solicitor has told you that you need one of these policies, it’s either because;-
1) He is protecting your interests if you are buying without a mortgage.
2) He is protecting both the interests of you and your mortgage lender, if you are buying with a mortgage.
If option 2) is relevant to you, then it’s unlikely that you have any choice in the matter. The mortgage lender will not allow the conveyancing solicitor to proceed to get your mortgage monies without the relevant policy is in place, protecting the mortgage lender’s security.
It is unlikely that your conveyancing solicitor benefits in any way by recommending policies to you. To my knowledge, it’s not something that the solicitor makes any money from, the money is just a third party fee (known as a disbursement) paid direct to the insurance company on completion. Solicitors usually use the cheapest insurers offering the best cover, or they should do if they want to offer a good service to their clients. Some I suppose may receive an incentive from the insurer for passing clients to them but if this is the case, then the solicitor is duty bound to inform you, so check the small print. If this is the case, then ask for alternative quotes, because you may find a cheaper supplier.
If your seller refuses to provide a policy for something that’s wrong at the property, then you can either pull out of the transaction, threaten to do so and see what the result is, or bite the bullet and pay for the policy yourself. Unfortunately, some sellers point blank refuse to pay for policies, even though those policies are required due to something that the seller has done. In my view, this is completely unreasonable but as explained above, your conveyancing solicitor can’t actually proceed if you’re getting a mortgage without the policy is in place. It’s therefore up to you as to how you want to proceed.
It’s worth asking your conveyancing solicitor whether or not they obtain their indemnity insurance policies online. I get mine through a company called Legal & Contingency Limited. Their online policies are actually quite a bit cheaper than the paper ones, I recently managed to save my client over £50.00 on two policies by getting them online. Otherwise, the conveyancing solicitor basically has a file of sample policies, called “instant issue policies” which they just write out, and then send the cheque to the insurance company.
Before issuing the policy however, you should see a copy of the proposed policy, its terms and the quotation as to cost. I always provide these documents to my clients for them to look through before we go ahead and instruct Legal & Contingency. GCS and Norwich Union also offer such policies; however in my experience, they are more expensive, even when obtained online.
27 Responses to “Indemnity insurance policy – Do you need it?”
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January 27th, 2009 at 10:25 pm
[...] Indemnity insurance policy – Do you need it? [...]
May 20th, 2009 at 12:19 am
i have not got a completion certificate because of minor details, but we have accepted a offer on our house, the work was done end of 2005, i know the work is good my son-in-law did the work and his was passed same spec. but we had a different officer. can we get a indemnity insurance policy now, and where from.
many thanks
d lawson
May 21st, 2009 at 5:39 pm
Dear Dawn,
I wouldn’t worry too much, as long as you haven’t received a notice from the Council for breach of building regulations, your solicitor should be able to put a policy in place for you. I don’t actually know whether or not you can obtain one directly from an indemnity insurance provider, but you could always ring and ask. Usually, the solicitor would offer the policy on your behalf to the buyers/their solicitor and then put the policy in place for you upon completion of the sale.
The providers that I use are Legal and Contingency, you could give them a call to see if they will let you buy a policy directly. Their details are as follows;-
Legal & Contingency Limited
19-21 Great Tower Street
London
EC3R 5AR
Tel: 020 7397 4343
Fax: 020 7397 4344
Email: enquiries@legal-contingency.co.uk
I really wouldn’t worry about this too much though, your solicitor will be able to deal with it for you.
Hope this puts your mind at ease,
Kind regards, Gemma
June 29th, 2009 at 7:48 am
I am considering buying a house which has a rear extension
No Building regs or planning is available = in fact on the HIPS it says NONE
I am getting so much different advice on this- dont buy, buy, buy with insurance etc
I have contacted the local council and they say there is no planning or building regs on their system , but that it only goes back to 1969 and this may have been built before
I am not getting a mortgage to buy the house-it is an investment – the house needs a total refurb
I am worried about re selling the house without building regs as most people say it would be blighted and unmortgagable
can you help
Many thanks
Karen
July 16th, 2009 at 8:19 pm
First of all Karen, my apologies for the delay in responding to you.
Rear extensions do not always need planning permission, they can be what is called “permitted development”. This depends on the way in which the property was constructed. The issue of planning will not be relevant in this particular case, as it is only enforceable for four years.
The likelihood is however that building regulation approval would have been required.
The difficulty here is that if you have already contacted the Council and have given the property address, then this makes them aware of the lack of approval and this puts them “on notice”, which means that you cannot now obtain an indemnity insurance policy. It depends what you said when you spoke to them. If you did not mention the property address, then this is still an option open to you and obtaining such a policy would not mean that the property would be “unmortgagable”.
It is worth mentioning though, that indemnity insurance only insures against the possibility of the Council taking enforcement action to rectify the breach and the costs you would have to pay out associated with this. What it does not cover is the possible structural problems which there may be if the extension has not been properly constructed in accordance with building regulations.
Another option would be to require the seller to obtain retrospective building regulation approval. Remember that without such retrospective consent, even if you obtain insurance, the fact is that the lack of approval could reduce the value of the property when a valuer comes to undertake a report for a mortgage lender.
The best option, although it could take a little longer, is really to insist upon the retrospective consent, or that the seller obtains from the Council a letter to confirm that the extension was of such size and construction so as not to require building regulation approval. I suspect that it did. Where work has been carried out since 11th November 1985 without building regulation approval, retrospective consent can be applied for.
I think to be honest that you really need to know when this extension was actually built. The suggestion at a course I recently attended was that since the case of Cottingham v Attey Bower & Jones (2000), building regulations breaches are really only enforceable after 1985, as any injunction proceedings can only be taken by the local authority for breach under S.36(6) of the Building Act 1984.
If the extension was earlier than this and did need building regulation approval, then it should be statute barred in terms of action taken by the Council BUT you should still have the structure fully inspected by a fully qualified surveyor to check for structural defects. As mentioned above, indemnity insurance does NOT cover loss as a result of structural defects.
Hope this helps!
Gemma
July 16th, 2009 at 8:26 pm
[...] Indemnity insurance policy – Do you need it? [...]
October 15th, 2009 at 1:34 pm
I am buying a property that is on a land which is not ‘fully’ registered. The seller was unable to register fully since it is unsure whether a third party can make a claim to the title in the future. I am unsure if I should proceed with this deal or not. Please advice!
October 16th, 2009 at 7:20 pm
Without more information, it’s difficult for me to give an absolute answer but you should absolutely seek legal advice from a qualified solicitor immediately. The danger with defective titles is that mortgage lenders will often refuse to offer a loan and whilst you may or may not need a mortgage to buy, other buyers may in the future and your property could be potentially unsellable in the future. Your solicitor is the only person who can look at all the relevant information and advise you whether or not to proceed and I advise in the strongest terms that you listen to that advice.
Kind regards,
Gemma
April 28th, 2010 at 10:23 pm
I bought my house in Dec 07 with a rear extension built in 2001 and my solicitor told me the extension was exempt from Building Regulations Consent and Planning Consent, “in any event, in view of its size”.
Now my friend tells me it’s not right, even though it’s less than 30m2 floor area I still need building approval, is it true?
I emailed my local council and they replied “no Approval was issued as the plans were rejected. Their records “show only a few inspections were carried out at the start of the works in 1980 and no further requests for inspections are recorded until the file was closed in 1989.”
I’m so crossed as I don’t know if i still can buy the indemnity insurance or should I just go for retrospective building approval application – or can I buy the insurance first then apply for the retrospective?
Thanks,
Sandy
April 29th, 2010 at 11:27 am
Dear Sandy,
Regrettably, as you have already contacted the Council about this, you have put them “on notice” of the breach of building regulations. This means that you have invalidated the potential indemnity insurance policy. You are therefore going to need to arrange for a building control officer to attend the property to see if you can obtain retrospective consent and if not, you will need to pay for whatever works are required to rectify the breach. Indemnity Insurance can only be obtained if the Council have not been made aware that a breach exists.
If it does transpire that building regulation approval was required and your previous solicitor informed you that it was exempt, then I would consider making a complaint to the solicitors’ firm in an attempt to recover any costs incurred as a result of this. The solicitor has a legal duty to properly investigate whether or not building regulation approval is required and a landmark case Cottingham v Attey Bower & Jones (2000) confirms this.
In terms of your question regarding what is required for the extension to be classed as “permitted development” and therefore exempt from building regulations, my understanding is that if it is a single detached dwelling of less than 30 square metres, it is exempt. My understanding is that extending an existing dwelling does require building regulation approval. The fact that the plans were rejected originally also suggests to me that building regulation approval was required.
The best action that you can take is to speak directly to the Building Control Officer at your local Council, providing details of what has happened and of the size and construction of the extension. You have put the Council on notice of the breach and whilst enforcement action is unlikely, Indemnity Insurance Providers still will not provide insurance in this event.
Hope this helps,
Gemma
April 29th, 2010 at 10:07 pm
Thanks Gemma, your advice is very helpful and useful! I’ll speak to my council next week about it!
Thanks again,
Sandy
June 4th, 2010 at 4:07 pm
Hi
I am purchasing a property that has a two-storey rear extension. Due to a previous bad experience I innocently emailed the local authority to enquire as to whether buidlings control application had been made. I was told no application record was held.
It now appears that I amy have put the council ‘on notice’ and can’t buy an indemnity policy? Is this true? I simply made an enquiry!!
Thanks
June 4th, 2010 at 5:24 pm
Hi Lotti,
The technical answer to your question is yes, and you should always consult your solicitor before making such enquiries to check the effects it could have.
Do you have any information as to how long ago the extension was built? Could it simply be that the Council does not keep records that far back? I believe that at very least, a two storey extension would have required building regulation approval and a completion certificate. I am not certain as to planning permission.
I think that the answer now is that you need to know how long it has been built for. Even if it does definitely need building regulation approval and a completion certificate, this can be dealt with retrospectively by a building control officer. The difficulty arises if the work does not comply, because then the seller needs to make alterations so that it does.
In short, I think you need to speak to your solicitor to find out more information about the works undertaking.
Hope this helps!
Gemma
June 5th, 2010 at 12:06 pm
Hi,
We are selling our house and did not get building regs involved when we had our garage converted to a kitchen 4 years ago. We have contacted the council but think it will not pass due to no floor insulation. I know that we can not now get an indemnity policy as the council are informed. Would it be possible for our buyer to get this policy though?
June 7th, 2010 at 5:13 pm
Hi Jenni,
Unfortunately, it doesn’t matter who informed the Council or who tries indemnity insurance, an insurer will not insure when the Council have been informed of the breach. Your only option, so far as I am aware, is to arrange for a Building Control Officer to attend the property to assess it, and for you to complete the works required in order to comply retrospectively with Building Regulations.
Hope this helps!
Gemma
June 15th, 2010 at 9:17 pm
Hello
My boiler was installed but i do not have the building regulations certificate. The installer can no longer be traced.
I’m currently SSTC but the purchaser’s solicitors are requesting the certificate. Is there anything I can do in to prevent this sale falling through?
June 16th, 2010 at 2:07 pm
Hi Adam,
You should simply be able to obtain a building regulations indemnity insurance policy for the lack of Certificate. The usual requirements are that you have not received any notification of recognition of the breach, that the breach has existed for 12 months without any action for enforcement being taken and that you have not informed the Council of the breach of building regulations. Your solicitor should really be advising you of this, it is a simple and usual process in many transactions. I cannot see that any purchaser who wants the property would withdraw for the sake of this.
The price to you will depend on the price you are selling for. Generally speaking, policies cost from £15.00 to £50.00. I would advise obtaining a policy from Legal & Contingency, who will offer good discounts if you obtain the policy online, or rather, if your solicitor does. The solicitor will have their own provider already but you are entitled to ask that they get an alternative quote from someone else to see if it is cheaper.
Kind regards,
Gemma
July 9th, 2010 at 1:14 pm
Hello,
We carried out alterations to our home which were completed in May 2009. We were informed at the time that no approval was needed however it has transpired that we should have had a building warrant issued for the work.(replacing existing window with patio doors and bricking up existing back door). Our house is on the market and we are concerned that this will make it difficult/ impossible to sell. could you provide us with any information on a way forward and if an indemnity policy would be of any benefit in this case?
Thanks Suzanne
July 20th, 2010 at 9:22 pm
HI, we have been unable to complete on the sale of our ground floor flat due to lack of building reg certificate being issued. The owners of the flat above us purchased their flat with indemnity insurance and so did the owners (who are also the freeholders) of the basement flat. We have been told that we cant purchase an indemnity policy as we have put the council on notice and funny enough the solicitor who acted for us on the original sale of this flat wont return my calls. Our buyers solicitors are now asking us for building reg cert for the basement flat, which was converted in 2003 (but he is not asking us for the build reg cert for our own ground floor flat). We have been told that if we cant get Building reg certs, that this will mean that everyone else’s indemnity policies will be invalid. This is very stressful and now we are close to losing the house that we have had an offer accepted on. We have submitted plans into council for a retrospective build reg approval, how long will this take and is there anything else I can do to ensure the sale goes through. (PS: our buyers have now moved into our flat and are renting from us, while we are in a short term rental until completion of our new property). pls help!
July 20th, 2010 at 10:17 pm
Hi,
I am very close to purchasing a new house. The property has a substantial ground floor extension (2006), which has the correct planning approvals but does not appear to have building regulations completion certificate. We are pretty confident about the quality of the work as the surveyor instructed the bank to ask us for a structural engineer to review the property. The structural report has come back fine and the seller is now offering indemnity insurance to compensate for the lack of building regs, which I understand is pretty standard.
My question is this: we are happy to take the insurance but we would also like to undertake some further work on the ground floor extension (two new sets of patio doors, one replacing a window, putting in a utility room and a new internal door) which we would want to seek out the proper approvals for. Would we, by inviting inspectors to review work undertaken in the future, invalidate the indemnity insurance offered by our seller now?
July 21st, 2010 at 2:40 pm
Hi,
I’m in the middle of buying a house and the HomeBuyers report mentions the fact that a chimney breast is present in bedroom, but not in kitchen below and there is no stack outside. The surveyor advised to seek building regs cert.
I phoned the Council to check if there was planning permission, who advised to call Building control who said there was nothing on file. I do not know when this was removed. I assume this counts as notice, as in thread above?
I’m confused as to who needs the indemnity me or seller? Also when I come to sell will the policy cover me?
Thanks
Alex.
July 21st, 2010 at 7:52 pm
Dear Gemma,
My boyfriend has sold his house STC but is having difficulty with a problem with a so called storm that runs down the driveway of his property and under a garage that was built about 35 years ago, the actual property having been built in 1963.
He has made several calls to the Water Company and to the Local Planning Department and they both say that due to the age of this garage it didn’t need permission and that being just a storm drain, it was nothing to worry about. His buyer’s solicitor is insisting that he obtain something in writing to substantiate this from either source which at the moment he is having trouble with, being passed between different departments and noone seems to want to put their neck on the line, so to speak.
He is due to exchange contracts in a week and the buyer’s are threatening to pull out if he cannot get the written substantiation in time.
Would it be possible to purchase an indemnity policy to cover this problem in order to get the ball rolling again and so that he can complete and move himself.
You are right about getting a good conveyancing solicitor, his has been rubbish and really hasn’t earned her fee. Andy has been doing most of the research work for herand the stress over this issue is getting unbearable.
I hope you can help
Many thanks
Anita
July 24th, 2010 at 3:25 pm
Hi Anita,
Firstly, my apologies for replying to you; Im currently on honeymoon but checking my messages and saw your enquiry! (Fortunately for my new husband, I can type very quicky!)
The short answer is that I do not believe that an insurer would provide indemnity insurance now. As you can see from the posts, if the relevant bodies have been notified of a potential breach, then usually, it is considered to have been put “on notice” and as a result, insurers refuse to insure.
It is possible I suppose that an insurer may offer some sort of bespoke policy, but I strongly believe that the best answer lies with your solicitor. She could write to the relevant department, rather than your boyfriend making endless telephone calls. This is what she is being paid for and certainly I would have no hesitation in writing urgent correspondence to either the Council or the Water Department (in fact, I would suggest both and see who replies first!). This really should have been done as soon as the issue came to light and I wonder whether it has been or not? I agree that it sounds very unlikely that after 35 years, anyone is going to raise issue with this and I cannot see either how the Council or the Water Company could successfully enforce anything after such a long period of time has elapsed.
I hope this offers some assistance – I would strongly recommend that Andy contacts his solicitor and asks for urgent letters to be faxed to the Council and the Water Company. In the meantime, he may also wish to consider discussing the issue with an indemnity insurance provider to ascertain whether or not they would definitely refuse to offer cover – there is no harm in asking! I use a company called “Legal & Contingency” and would suggest that he contacts them, as they offer good discounts for policies obtained online.
Kind regards,
Gemma
July 24th, 2010 at 3:38 pm
Hi Alex,
Im afraid it is correct that by contacting the Building Regulations Department, notice has now been provided to them of a potential breach.
As to who needs the policy, well technically, both of you. The seller will need the policy in order to be able to sell the property to a potential buyer, particularly one who is obtaining a mortgage because whilst a cash buyer could simply choose to accept the risk, a mortgage company would not agree to do so. I assume that you are buying with a mortgage but if not, it is a decision for you as to whether you want to proceed without the benefit of a policy.
Assuming you are getting a mortgage, I would suggest that the seller should pay for the policy and indeed this is usual; however, it is not unusual for a seller to simply refuse to pay for it, a decision which I think is somewhat unfair given that they have committed the breach. Different policies have different terms, so it is difficult for me to answer your question regarding future buyers; however it is usual for a policy to cover any successor in title i.e. any future buyer, as well as you.
One issue you should be aware of however, is that if there has been a breach of building regulations and you are able to obtain a policy (which is unlikely given the issue of notice) then such a policy does not cover you for any structural problems; it simply covers any potential action taken by the Council to enforce the breach. I therefore recommend to everyone where there has been a breach of building regulations that the offending structure should be inspected by a suitably qualified surveyor to check that there is no structural defect which could affect your future enjoyment of the property.
Hope this is of some assistance.
Kind regards,
Gemma
July 24th, 2010 at 3:47 pm
Hi Antony,
My apologies for the delay in responding; as you can see from my other posts today, I’m currently away on honeymoon and have taken the opportunity during a hotspell to reply to some of the enquiries coming through!
My advice is that before you decide to proceed with this property, you should obtain a copy of the proposed indemnity insurance policy and check the terms of it. I would strongly suggest that you contact the proposed insurer directly and ask them this question; they will be best placed to provide you with the correct information and I am concerned that if you proceed without making these enquiries, you could proceed with a property that you subsequently cannot alter as you wish. Certainly it would be inviting problems to undertake further work on an extension which does not already have approval, because the approval for the new work may be dependent upon you rectifying any breach committed when the previous work was undertaken. Retrospective consent can be obtained, but the cost would entirely depend upon what works, if any, need to be undertaken before the extension is compliant. I would suggest therefore that a better course of action may be to obtain a bespoke policy from the indemnity insurance company which would cover your works and the previous works. I know that such policies can be obtained and perhaps it could be agreed with the seller that the cost of a standard policy should be deducted from the sale monies by you on completion and that you pay the balance required to obtain a bespoke policy.
Hope this helps!
Kind regards,
Gemma
July 24th, 2010 at 4:08 pm
Hi Jen,
Firstly, keep pursuing your previous solicitors! They may have on file an indemnity insurance policy for your flat and havent told you, you never know. If they didnt sort this out when you bought the property, then this could amount to negligence and a claim could be pursued through the Legal Complaints Service. In my experience, the threat of a formal complaint is usually sufficient to get a response from even the busiest solicitor and you may wish to test this out.
Please note that in order to be in a position to refer the case to the LCS, you would first have to proceed through the solicitor’s firm’s complaints service and I suggest that you telephone them and ask for a copy of their complaints procedure. Follow that procedure, the starting point usually being a formal letter of complaint outlining the issues, including the continued lack of response to your calls.
Dealing with the main issue, I honestly cannot answer whether or not the other leaseholders’ policies would be invalidated by your enquiries. I would suggest that you find out who their provider is and either you or the other leaseholders should make enquiries. Alternatively, ask your solicitor to make enquiries on your behalf; this is what you are paying them for!
Kind regards,
Gemma
July 24th, 2010 at 4:28 pm
Hi Suzanne,
My apologies for the delay in replying; your message came through on the day before my wedding and Im afraid I’ve just managed to get to it!
Firstly, how did you find out that building regulation approval was definitely required? Did you contact the Council and if so, did you tell them the property address, as this would constitute “notice” and prevent you obtaining an insurance policy?
Assuming indemnity insurance is a possibility, I cannot see why this should make your property impossible or even more difficult to sell. Make enquiries with an indemnity insurance company – I would suggest Legal & Contingency.
Kind regards,
Gemma