If you are buying or selling a property the conveyancing process can get complicated and there are all sorts of problems that can arise. While many of these can be relatively minor, they can cause the mortgage lender to delay in releasing funds and moving the process forward. Indemnity insurance can help ensure that everything runs smoothly and prevents any delays.
- Indemnity insurance can cover a broad range of issues from problems with the building itself to legal matters relating to the title and deeds.
- Any legal ‘defect’ can cause a delay in the selling of the property – indemnity allows a buyer who is otherwise happy with the sale to proceed with the sale.
- The policy is usually intended to cover the buyer and lender and protect them from problems in the future.
- The insurance is put in place with a single payment which is normally paid by the seller.
An example where indemnity is useful is if there are missing conveyancing documents. You might be buying a home but past information after a search is not available that could contain vital information about restrictive covenants (what you can do and not do on the property).
While the title document may be missing, someone, somewhere could well have a copy of it and, if you break the terms of the covenant, you could be liable to legal proceedings. The chances of this happening are considered pretty slim but the fact that a document is missing may cause the buying process to stall. The indemnity covers you should there be a problem – that means the mortgage provider will, hopefully, be happy to proceed.
Another more common occurrence is if the previous owner built something like an extension but didn’t get the right documentation for the construction. The extension is perfectly safe but there is no Building Regulation Completion Certificate for instance. Again, the indemnity covers this issue as long as it can be confirmed that the extension is in a safe state.
The most common areas where legal indemnity extends is in building and planning permission regulations or the potential for there to be restrictive covenants that haven’t been revealed in the normal course of things. The latter can include a whole range of restrictions from a bar on building in the garden to keeping livestock in the back yard.
- Absence of easement is another factor – where you have a route to the property that the owner doesn’t have a right to use for some reason. The indemnity would cover the cost of granting permission.
- Chancel repairs can often be found during a search which means that a home owner might be liable for repairs to the local church.
- The indemnity insurance can also be used to offset the potential for insolvency if a gifted deposit is being used during the sale.
It’s always a good idea to discuss indemnity insurance and the impact on the property you are buying or selling with your conveyancing solicitor. On the whole, the value of having it means that the selling of a property goes smoothly and can prevent mortgage providers from holding up the process because they are concerned about minor legal details.