Why do you need indemnity insurance...?

ernie-money

Hi all,

I have searched the forums and found LOADS of threads about indemnity insurance, but as I don't really know anything about it, they don't make that much sense to me...

We have recently bought a house, and on the completion statement there is a figure showing for "breach of restrictive covenant indemnity". We haven't actually paid for it, as there is also an "allowance" for it listed on the statement. (No idea who's paid this allowance)

I'm not sure if it's relevant, but the house we've bought is an ex council house that was bought from the council in the 80's.

I'm just wondering if this indemnity insurance is something you automatically get when you buy a house, or if it means that something hasn't been done according to regulations...? Or will it cover us if anything arises in future...?

If so, do we need proof of this insurance somehow, as we have not received anything relating to it from the solicitors?

I'm sorry if these questions seem like something that should be basic knowledge when you're buying a house, but I've just never come across this before...

Hope that someone can clear this up for us!
Many thanks
Mia

Sammy85_2

Alot of houses come with restrictive covenants.

Ours (a 50yr old house) came with quite a few:
* no livestock or chickens
* no caravans
* maximum 1 vehicle
* no parking on the street

Thats just a few of them!!

I think your insurance covers you in case someone actually came along and enforced the covenants (although judging on the number of cars in my street and caravans on drives i would assume it is not enforced anymore)

Im not sure about the paperwork side of the insurance though.

ernie-money

That makes sense! I wasn't sure of the terminology, but there were quite a few conditions, like that you have to keep the hedges trimmed to a certain height, not put a shed in the garden and more importantly are not allowed to sell the house on within the next 5 years.
But now I'm just wondering, if we do break these terms, and someone tries to enforce them - how can we prove that we have this indemnity insurance, when we've never seen any proof of it, apart from it appearing on the solicitors completion statement...?

Gwhiz

ernie-money wrote: »

That makes sense! I wasn't sure of the terminology, but there were quite a few conditions, like that you have to keep the hedges trimmed to a certain height, not put a shed in the garden and more importantly are not allowed to sell the house on within the next 5 years.
But now I'm just wondering, if we do break these terms, and someone tries to enforce them - how can we prove that we have this indemnity insurance, when we've never seen any proof of it, apart from it appearing on the solicitors completion statement...?

If you trust your solicitor that little, maybe you should not be using them. Maybe they'll run off with all your deposit money too!!!

Richard_Webster

Your solicitor should have explained in his pre-contract report (did you get one?) that there had been a breach of restrictive covenant by the seller or by one of the previous owners. Usually this relates to building extensions/conservatories etc without consent from some former landowner.

Normally the seller would expected to pay for it so an allowance would have been agreed off the money actually paid over by your solicitors to the seller's solicitors so that your solicitors had the money to pay for such a policy.

Check with your solicitors. If you have only recently purchased then, in a few weeks, once registration has taken place at the Land Registry, your solicitors will probably send you a copy of the policy or the original if your mortgage lender does not want it.

These policies normally last forever but need upgrading if the property is later sold for more than the cover given by the policy. Also they do not cover breaches of covenant that take place after the date of the policy.

ernie-money

Gwhiz wrote: »

If you trust your solicitor that little, maybe you should not be using them. Maybe they'll run off with all your deposit money too!!!

This really isn't about trusting them, all sorts could happen in the space of time we intend living in this house. What if the company no longer exists for whatever reason (the first solicitor we were going to use went bust) and you can't contact them if there are issues further down the line? This is why I'm trying to find out if we SHOULD have some sort of proof of this policy existing, or if prudryden is right and we don't own the insurance.

ernie-money

Richard_Webster wrote: »

Your solicitor should have explained in his pre-contract report (did you get one?) that there had been a breach of restrictive covenant by the seller or by one of the previous owners. Usually this relates to building extensions/conservatories etc without consent from some former landowner.

Normally the seller would expected to pay for it so an allowance would have been agreed off the money actually paid over by your solicitors to the seller's solicitors so that your solicitors had the money to pay for such a policy.

Check with your solicitors. If you have only recently purchased then, in a few weeks, once registration has taken place at the Land Registry, your solicitors will probably send you a copy of the policy or the original if your mortgage lender does not want it.

These policies normally last forever but need upgrading if the property is later sold for more than the cover given by the policy. Also they do not cover breaches of covenant that take place after the date of the policy.

Thank you very much for clearing that up - very useful information!:T