What is an indemnity policy?

Valencia

My solicitor emailed me today and told me that because my vendors don't have building regulation consent for the removing of a wall (between the living room and dining room, which was there before they moved in) they will be providing an indemnity policy. What is this and what is it for? Is it insurance?

Doozergirl

Yes, it's an insurance policy. I'm making an educated guess here that if the wall falls down, your vendor has a policy that will make sure that you suffer no financial loss when putting it right. It would also mean that you would still have no claims on your buildings insurance.

It's likely that if it was a supporting wall that whoever did it put a steel beam in place to hold the wall but didn't get it checked by Building Regs. TBH, it's more expensive to get Building Regs approval than to buy the insurance policy which is probably why.

I don't know how to explain this properly, but if the hole isn't completely flush to the ceiling and you still have some wall above your head, there is likely to be a steel beam. If your surveyor didn't have any major reservations except to ask for the Building Regs certificate, I'd be sure it was fine and that your solicitor is being prudent.

HTH. Not on top form today!

Valencia

Thanks Doozergirl.

RiskAdverse100

I am afraid that, while such indemnity policies do offer a kind of insurance, they certainly won't pay anything out if the wall falls down!

They only cover you against the risk of the local authority taking enforcement action against you, as the current owner of the property, as a result of a breach of the building regulations.

Indemnity policies taken out where work was done without obtaining building regulations are, in my opintion, rather a waste of money.

One condition of the policy is that the work involved must have been completed more than 12 months ago and, under the Building Act, a local authority cannot take enforcement action in respect of work that was not carried out in compliance with the building regulations where the work was completed.........more than 12 months ago!

So the policies cover the possibility of the local authority taking enforcement action using other legislation. For example they might be able to take action because the building is as a result dangerous and constitutes a public health hazard.

Yes, you might have to take out these policies in order to comply with the requirements of your lenders, if a mortgage is involved, although my advice when you are not sure if work complies with current regulations is to have this properly inspected by a surveyor or structural engineer. This is a much better insurance policy against problems arising in the future!

RiskAdverse100

Doozergirl

That's really interesting RiskAdverse, especially the 12 month bit. Thanks for that.

silvercar

We had a similar problem with a garage conversion that the owners hadn't obtained a building consent certificate for. My solicitor said (and I quote because legalise can be interpreted):

"It is possible to effect indemnity insurance against lack of approval, but that’s only a claim for the diminution in the value of the property by reason of the absence of the approval. It doesn’t cover you if there’s something actually wrong with the construction that needs replacing."

charlnel

Can any one help?? We are in the process of buying a house and the kitchen has been extended, chimney breast removed and inner wall removed all of which have no building regs. This work was done over 20 years ago so is a indemnity insurance really needed. The seller will not provide one so the cost lies with us but cause the work was so long ago we are unsure whether to go ahead with the solicitors request to pay for one. We need no mortgage for the property. What do you advise.

peb

As I would agree with Riskadvserse if you don't need one for your lender (as you are mortgage free) don't bother. The policy will only cover you if the Local Authority insists that works are redone as they are unsafe; it does not cover you for bad workmanship or for the wall falling down. I woudl howver seriously comtemplate having a structural survey done. DOn't forget that the legislation may have been complied with and no evidence is available - many local authorities keep records for 10/20 years only.

Richard_Webster

Have a look at this thread where I put up a post explaining that a lot of the fuss (particularly over fairly old works) is caused by mortgage lender bureaucracy:

http://forums.moneysavingexpert.com/showthread.html?t=715485