During the course of a sale or purchase transaction you may be asked, as a Seller or Buyer, to provide or take out indemnity insurance. This could be title insurance to rectify a defect on the title deeds, insurance to cover the lack of evidence of building regulation approval or, most commonly, chancel insurance if there is a potential chancel repair liability.
What is Indemnity Insurance I hear you ask? Put simply, indemnity insurance is a policy that can be taken out to protect you, your successors in title and/or Lenders against the implications and costs of a third party making a claim in respect of the defects with the property. A one-off premium is payable for each indemnity policy, although some providers offer reduced premiums for combined policies. Discounts may also be offered, for instance, where the works that required building regulation approval were undertaken many years ago.
As an example, if a Seller has had a new boiler installed since 1st April 2005 then building regulation approval will have been required. In this instance, the installer should have notified the Local Authority as well as ‘GasSafe’ or ‘CORGI’ for gas boilers or ‘OFTEC’ for oil-fired boilers. If the Seller cannot provide the relevant installation completion certificate, and this is not revealed in the Buyers Local Search, then the quickest and simplest way of overcoming this issue is for the Seller to provide indemnity insurance.
Who should pay for indemnity insurance? This is a matter of negotiation between the Seller and the Buyer. Some may argue that it is the responsibility of the Seller to provide indemnity insurance where the defect was caused by them i.e. if building regulation approval wasn’t obtained for an extension. However, there is also the argument that indemnity insurance benefits the Buyer and therefore responsibility for the premium should lie with them. If you are unsure whether you should take out or provide indemnity insurance, check with your legal advisor whether it is really necessary and if so whether a discount can be obtained.
Can indemnity insurance pass to a new owner? Yes, as most indemnity insurance policies relate to the property itself and usually cover current and future owners. Although, this should be checked at the time of taking out the policy as certain policies such as ‘No Search’ mortgagee indemnity insurance applies only to the Lender that is holding a charge over the property at the policy commencement date and cannot be transferred.
Transferring an indemnity insurance policy may incur an additional premium if the value of the property has increased since the policy was originally taken out or if the name/ number of the insured property has changed. Again, this is something you would need to check with the insurance provider if the situation arises.
Indemnity Insurance can be obtained from a number of providers locally such as ‘Countrywide Legal Indemnities’ or ‘Aviva Legal Indemnities’.
Every case, of course, depends on its own circumstances so always take legal advice from a trusted professional about your own set of circumstances.
This article was written on 15th January 2020 and the law may change following this date.
Abigail Englefield-Stangroom is a Chartered Legal Executive specialising in Conveyancing who is based at the Broads Centre office in Wroxham. Capron & Helliwell offer a fixed fee first appointment for family law matters - for details or to book an appointment please contact Dawn Pennell on 01692 581231.
This article aims to supply general information but it is not intended to constitute advice. Every effort is made to ensure that the law referred to is correct at the date of publication and to avoid any statement which may mislead. However, no duty of care is assumed to any person and no liability is accepted for any omission or inaccuracy. Always seek specific advice.