Restrictive Covenant Insurance

Mish_Mash

I am in the process of selling my flat and had a call from my solicitors today to tell me that the Title Deeds for my house were never lodged with the Land Registry.

The house was build in 1902. There are no documents for 1902 but there are documents relating to the lease extension in 1984.

I have now been asked to pay £170 for Restrictive Covenant Insurance.

I am really annoyed with my original solicitors who I used to buy the flat. They never flagged this to me or mentioned the need for insurance.

My problem is that I am due to complete in 3 weeks and I am really stretched financially. I will have to go into overdraft to pay for the insurance. I don't want to delay the sale in case my buyer pulls out. I am also concerned that my buyer may have second thoughts because of the problem with the deeds. It's all very stressful and a real pain.

With regards to my original solicitors, I have written to them to ask them to pay for the insurance. Was this the right thing to do? Should they pay for this? What happens if they say no?

Richard_Webster

Your solicitors should be able to take the cost of the policy out of the sale proceeds. I doubt if they will need the money upfront - but it will still reduce the amount available for you after the sale is completed.

How much is the property selling for? Two major companies that lots of solicitors use - GCS and Countrywide Legal Indemnities - charge £160 for properties worth between £150,001 AND £200,000. Norwich Union Online and Legal & Contingency Online are cheaper but not all solicitors use them.

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients.

Mish_Mash

Richard thanks for your response. There are no gains from the sale of my property sale. I am selling for 235k and am buying for 350k. There have been a number of unexpected costs associated with the move (such as my freeholder demanding £300 + VAT) and when you add on the £170 for the insurance I don't really have any cash contingency left. I suppose I am just annoyed that this was never flagged to me when I bought the property. I have contacted my original solicitor but have had no response. I have also spoken to the law society who have stated that the solicitor was negligent and that I can make a claim. It' just annoying because I have 110 things on my plate at the moment and this is the last thing I need.

FYI - I'm not sure who my solicitor is using but she has said it's the cheapest policy I can get.

RiskAdverse100

I think we need to know a bit more about the issue before deciding whether or not anyone has been negligent.

Restrictive Covenant Indemnity Insurance is often needed where the title registers refer to some covenants set out in an old document but say that neither the original nor a certified copy of the document was lodged with the Land Registry when title to the property was first registered.

This could be the case here although I would need to know more to be sure.

If the missing document dates from the time the property was built then the restrictive covenants invariably deal with the original development of the site are usually of no relevance now.

However, as whole streets were usually developed at the same time, the chances are that one of the titles to a neighbouring property will contain more information on what the restrictive covenants were. Sometimes you can obtain an official copy of the document to see if it contains a plan showing the extent of the development.

If this does not turn up a copy of the document then it is a judgement call for the solicitor. If the restrictive covenants are 100+ years old and date from the time the property was constructed then he may consider that the chances of a breach having occurred that could be enforced now are close to zero and so no indemnity insurance is required.

I have to say that in some cases - and I must stress that without a lot more information I cannot possibly say whether or not this is the case here - solicitors use indemnity insurance as an easy way to avoid investigating certain issues properly and to cover up a lack of knowledge.

I would be asking your current solicitor to explain exactly what the problem is, what he has done to try and investigate if it is really a problem now and why he thinks that indemnity insurance is the best solution. Then post back here for further comments!

RiskAdverse100

Mish_Mash

Thanks RiskAdverse100. I'll put your questions to my solicitor. I've already had a look at the Deeds for my next door neighbours (as I know that all of the local properties were built by the same person/company in 1902). There is nothing out of the ordinary listed so I wouldn't envisage there being anything different listed in my deeds. I believe that the Indemnity insurance is being requested by my buyers solicitors, but I'll confirm this with my solicitors tomorrow. I'll let you know how I get on.