Why does the seller have to pay for indemnity insurance?

vet8

I know that virtually every house sale these days seems to throw up a need for an indemnity insurance, but can anyone explain why the seller has to pay?

To my layman's mind it seems about as logical as the seller paying for insurance in case the house ever burns down in the future. The buyer will get any money if they ever have to make a claim, so why should the seller pay.

G_M

Because the buyer threatens to withdraw his offer unless the seller pays. It's a buyer's market.

When the tide turns and we get a sellers market, sellers will be able to say "you want insurance? You pay. If you're not happy with that I have 5 other buyers interested in my property"

Bananamana

generally the seller pays because it's their fault that the risk the insurance is protecting against has been put in place.

Such as failing to get the proper permissions.

DVardysShadow

Someone asked a facetious question

Q. A seller has potential to have martians land on his back lawn. Does he insure?

The answer illustrates the principle

A. If the Martians' rights to land derive from the deeds, or because the owner did something to the property which is known to attract Martian landings, then the seller should insure. If the risk is that Martians just land without a by your leave and with no known factor on the property which will attract Martians, then the buyer should insure.

vet8

Bananamana wrote: »

generally the seller pays because it's their fault that the risk the insurance is protecting against has been put in place.

Such as failing to get the proper permissions.

I see that, but what happens when the problem is not the fault of the seller? For instance, if the building work was done by a previous owner, many years ago, maybe several owners ago and the "problem" has only just come to light as solicitors seem to be looking for these problems more now than before. It seems a little unfair if the current vendor has to pay money to insure against something that is not his fault.

vet8

G_M wrote: »

Because the buyer threatens to withdraw his offer unless the seller pays. It's a buyer's market.

When the tide turns and we get a sellers market, sellers will be able to say "you want insurance? You pay. If you're not happy with that I have 5 other buyers interested in my property"

I think this answers the question. These indemnity insurances are a total waste of money, but solicitors like to ask for them and know that vendors will pay as they are desperate.

A previous thread on here asked if anyone had ever made a claim from one of these, no one had. I think that solicitors ask for them to make their life easier and to save them doing extra work. That certainly seems to be the case in our house sale.

neverdespairgirl

vet8 wrote: »

I see that, but what happens when the problem is not the fault of the seller? For instance, if the building work was done by a previous owner, many years ago, maybe several owners ago and the "problem" has only just come to light as solicitors seem to be looking for these problems more now than before. It seems a little unfair if the current vendor has to pay money to insure against something that is not his fault.

it's not a question of fault, but the seller owns the problem, along with the land.

Bananamana

vet8 wrote: »

I see that, but what happens when the problem is not the fault of the seller? For instance, if the building work was done by a previous owner, many years ago, maybe several owners ago and the "problem" has only just come to light as solicitors seem to be looking for these problems more now than before. It seems a little unfair if the current vendor has to pay money to insure against something that is not his fault.

It depends on the individual circumstances and negotiating strength of the parties. Generall, the more recent the breach the more likely the seller should/ will pay up.

Now if you get a solicitor seeking indemnity for covenants dating back to the 1900's then yes you should be telling them that if they consider it to be a risk then they can put it in place at their own expense.

jonewer

vet8 wrote: »

A previous thread on here asked if anyone had ever made a claim from one of these, no one had. I think that solicitors ask for them to make their life easier and to save them doing extra work. That certainly seems to be the case in our house sale.

Solicitors ask for them because they can be sued if they allow a client to buy and motgage a property where problems exist with planning and building regs.

The fact that they are hardly ever claimed on is neither hither nor thither but does explain why they are so cheap to take out.

vet8

Bananamana wrote: »

Now if you get a solicitor seeking indemnity for covenants dating back to the 1900's then yes you should be telling them that if they consider it to be a risk then they can put it in place at their own expense.

That is the sort of thing we are up against. The buyer's solicitor wants us to pay £250 for an indemnity insurance against something that goes back over 100 years. Also, if he had done his research properly he would see that, in this case, the insurance will be more usless than usual.

Doozergirl

There is no rule that says seller pays.

If you don't want to pay for it, tell them. See what happens.