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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.
8 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