Indemnity Insurance for Lack of Building Regs

holtro

I'm trying to purchase a property (barn) that was converted in 1999. Planning permission was granted but the building regs were not signed off, nor was an architect's certificate issued (I believe these are now called professional consultant's certificates - as of 2003 - and in any case are only valid for 6 years). The seller has agreed to provide indemnity insurance but my solicitor is concerned that, because we have already to contacted the local council to check on the outstanding points (fire door, extractor fan - nothing too major, and we would address these points, if were were to buy the property, at the same time as carrying out our own improvements), then the insurance policy may no longer be valid. Is this a huge problem or can it be got around if the insurer knows all the details? Secondly, my mortgage broker's concern is that the indemnity insurance might not cover our mortgage lender satisfactorily - shouldn't this be automatic if the indemnity insurance provides cover for loss in market value resulting from a successful enforcement action by the local authority, or is a separate clause required in the cover?

If anyone has experience of these matters, and can advise me, I would be extremely grateful!

silvercar

my solicitor is concerned that, because we have already to contacted the local council to check on the outstanding points (fire door, extractor fan - nothing too major, and we would address these points, if were were to buy the property, at the same time as carrying out our own improvements),

Your solictor is right, you can't take out insurance for something you know is going to occur. you've told the council there is a problem and so you can't take out insurance against the problem being noticed.

If you actually intend sorting the problems out, you could apply for a building regs certificate when you have done the work.

As far as the mortgage is concerned, if the company had a problem they would have put a retainer on the mortgage ie they would hold some money back until the work is done. Alternatively they may put a requirement in the loan that you complete the work within 6 months or similar. If the outstanding points are minor and/or the mortgage is not a very high loan to value ratio then the mortgage company are not likely to be bothered. They will generally be interested in the valuation as is, if that covers the mortgage you should be fine.

Doozergirl

I would be particularly concerned about buying such a recently converted property where building regs hadn't been obtained. Any halfwitted builder knows they have to get building regs sign off. We're not talking about a small extension or the removal of a wall, we're talking full conversion.

With my cynical hat on today, there's a reason they didn't seek sign off and I would guess it's because they knew it wouldn't comply. I'd buy virtually anything, but a recent conversion without building regs? Not for me at all.

Otherwise, both your solicitor and silvercar and right; once you've spoken to building regs, you're going to invalidate any indemnity policy. It's impossioble to get around as the likelyhood of the council chasing now for sign off and therefore the policy being claimed on is much increased. Unsurprisingly, insurers don't like paying out which is why they ask that matters are kept between the two parties and their solicitors.

silvercar

I would guess the building regs weren't signed off because they haven't completed the items you mentioned. When you phoned the council, at least they didn't say, "what conversion? we weren't informed they had started work!"

If you have had a full survey, your surveyor should have pointed out any major defects, there should also be written evidence of the building regs inspectors having done checks as the work was progressing.

With a survey I would be happy to buy a property as your describing.

When you come to sell the conversion will be that much older and either you will have obtained a certificate in the mean time or you can obtain an indemnity policy for your buyer's benefits.

With a survey I'd buy, especially as its 7 years old. I might be inclined to ask the sellers to contribute to the costs of the work necessary to obtain the certificate, after all they will need it whoever they sell to.

Doozergirl

If what you say is the case silvercar, then there should be no need for an indemnity policy at all as the trivial things which the OP has already contacted the council for, would lead to building regs sign off.

What concerns me is the possibility that building regs simply weren't involved in the main body if work. I can't see any benefit to the person that carried out the work in not getting sign off if they'd already gone through the main body of work with supervision from the council. On the flipside, I can see the benefit of not involving building regs at all on a conversion as existing features probably wouldn't comply and to replace them would be costly to the builder. Converting is already more expensive than building from scratch and trying then to make square pegs fit the round hole that is current building regs is even more costly.

I really don't approve of builders not doing things properly, expecially when we're talking about creating a dwelling from scratch, not just a room conversion by a naive householder. Would you buy a house newly built in 1999 without building regs sign off? There's not a lot of difference in my view!

holtro

Thanks Silvercar and Doozergirl for your very helpful posts.

It's definitely a confusing situation when you're inexperienced in such matters. We had a full structural survey done, and apart from the barn not being finished to the highest standard (it has only ever been used as a holiday let), it was on the whole a satisfactory summary. It did, however, stress that, while the work had been carried out using building notices (rather than the more belt & braces architect's certificate), there was no completion certificate, and it suggested we contact the council to find out what the outstanding items were. We duly did this, and we also have a copy of a letter from the council to the seller (in 2000) confirming a list of (relatively minor) points. Surely, in that case, the possibility of any indemnity insurance was already invalid back then as a result of this contact between seller and council?

I shall put to my broker your helpful suggestions Silvercar re building into the mortgage some kind of clause re getting the work done. Should we buy the property, we fully intend to address the outstanding points when we make our various improvements to the barn, in order to get a completion certificate, and have peace of mind that we wouldn't have any trouble selling on the property at a future date.

silvercar

If you've not yet applied for the mortgage I would wait and see what the valuation says - it may not be an issue for the mortgage provider.

If the seller last contacted the council 6 years ago, that shouldn't invalidate a policy that is taken out for your benefit rather than the sellers.

holtro

We've already applied for a mortgage which - according to our broker - is agreed subject to valuation and satisfactory resolution of the building regs issue (he says NO lender will be happy with the lack of completion certificate scenario). As the property is currently holiday let and therefore not vacant for a valuation to take place, the lender is going to use our full structural survey, which was actually carried out by the surveyors our lender would have used anyway.

Re the indemnity policy, if it was not invalidated by the seller's contact with the council, I fear it will have been when we contacted the council and had an inspector round to the property to confirm the outstanding issues to be addressed to get a completion certificate. We did this on the advice of the surveyor, but before our solicitor could tell us not to!