Is indemnity insurance necessary when selling your home?
Imagine you sold a house six months ago, and then you received a legal letter this morning about possible defects with the property. The buyer is claiming you might be liable for their costs if thousands to cover repair costs. What do you do?
If you didn’t inform the buyer before the exchange, you might be liable for their costs. Indemnity insurance covers you against this type of scenario.
Indemnity insurance usually involves a single payment. And cover lasts forever. This type of insurance is also a viable alternative to fixing a significant defect with your property before selling.
What conditions am I insured for with indemnity insurance?
Indemnity insurance covers you against a range of potential issues, including:
Restrictive covenant
A restrictive covenant forbids specific alterations to a property — such as an extension. Indemnity insurance covers and legal costs you might incur as a result of a covenant breach.
Building regulations
If a home you sold is found not to have the necessary building regulations documentation, indemnity insurance covers the costs of altering the property for compliance. The insurance also covers the administrative costs of putting things right.
Absence of easement
If a neighbour prevents you from accessing drains that serve your home, indemnity insurance covers the costs of legal action.
Planning permission
Building without planning permission can lead to legal action. In certain circumstances, this action might culminate in the demolition of a building or extension. Indemnity insurance covers all the costs associated with a non-compliant property.
Missing particulars
Indemnity insurance covers the seller for the costs of updating title deeds with missing or incorrect information.
No build-over agreement
If you decide to build an extension within three metres of a sewer, you might need to acquire a build-over agreement from the local water authority. Homes without such an agreement might be forced to remove all or part of the offending structure.
Adverse possession
If you can’t prove you, as the homeowner, own all of the lands on which your property sits, you might need to take steps to prove legal ownership. Insurance covers you against adverse possession and the costs associated with someone else claiming ownership of the land.
Is indemnity insurance expensive?
In most cases, indemnity insurance is well worth the expense because the cost of dealing with the issues raised above can be astronomical. Yet, the price of a suitable indemnity insurance policy can be as little as £20.
However, if you want to cover the costs of dealing with a lack of planning or building regulations, the policy will cost a lot more. Don’t be surprised to find quotes of between £300 and £600.
Is indemnity insurance for property sellers necessary?
The chances of running into legal issues after you’ve sold property are low because most indemnity policies never pay out — as problems are rare. But for your peace of mind, parting with £20 or £30 for a basic policy makes sense.
Get indemnity insurance if you suspect there may be problems with building regulations, planning permission, or land ownership. But be prepared to pay a hefty premium.
Taking out indemnity insurance is an excellent way to sell a house. It covers you for a range of legal issues, so you don’t have to waste too much time searching for missing paperwork, certificates and permissions. Indeed, many conveyancers and mortgage providers insist the seller takes out indemnity insurance at the earliest opportunity.
