Indemnity policy

FloraMac

We have just been in to sign our contract on the house we are buying. During the !omg appointment we discussed the ongoing issue of electric undefloor heating which was put in approx 2009 but there is no certification for. There is main gas central heating and this underfloor heating is through the kitchen/ diner, conservatory. The solicitor is going to request an indemnity policy is purchased by the seller to cover us for building regs and to help if ever we sell. We have told the sol it is not a deal breaker. The question is should we take out a policy to cover this risk? This is hopefully our final home after 15 moves with the military so no thoughts of selling.

KJX

I would be more worried about an indemnity for electrics than perhaps other issues.

The question I would be asking is what would the indemnity cover - would it be the cost of regularising the works? Or would it cover me in the event of my home insurance company failing to pay out if there were a claimable event relating to the electrics rejected because I knew there was no confirmation of compliance with the relevant building regs (the existence of the indemnity being proof that I knew).

FloraMac

So perhaps I should ensure a qualified electrician gives it the all clear instead of an indemnity policy. I do not believe an indemnity policy would cover the electrics?

FloraMac

Anyone had similar experience or thoughts on the subject?

silvercar

Being cynical, its already 6 years old, what is the chances of it being in place when you come to sell?

I would be more interested in satisfying myself that it works properly now.

Let the seller's take out a policy if they will, but it wouldn't be a deal breaker for me.

djedga

Indemnity policies are largely so that the bank can recoup the full value of their investment should they have to repossess so you may have no choice but to put a policy in place. It may be a condition on receiving your mortgage funds that a policy is in place.

If the bank repossess and have to rip out the underfloor heating due to lack of building regs etc. then the value of the property may not be as much as with it in place.

Alternatively it is in place so that you can cover any loss in value associated with losing that particular feature if the council come knocking and tell you to rip it out.

The scenario that this would be claimed on is highly unlikely but the banks are increasingly cautious and there seem to be indemnity policies for just about everything now!

Either yourself or your buyer can purchase, there is no onus on who should be responsible so this would be down to you to negotiate.

When / if you sell the cover then stays with the property. you or your buyer might need to top it up if the value of your house goes up (it will be linked to the value of the property).

G_M

1) The question is, are you concerned about:

a) Councoil enforcing BRs?
b) the system being dangerous?
c) the system breaking down?
d) the property resale value?
e) satisfying your mortgage lender?

2) After 6 years there is zero chance of the Council enforcing Building Regulations, even if they ever find out.

A section 36 enforcement notice cannot be served on you after the expiration of 12 months from the date of completion of the building work

Building Act 1984

3) Indemnity will pay out only if the council enforces BRs. It will NOT cover breakdown of the heating, or damage as a result of poor installation (eg electrical fire destroys the house....)

4) Often however mortgage lenders insist on an indemnity policy - are you getting a mortgage and are they insisting?

5) Concerns about a later sale are misplaced - you can always take out a policy at that time to cover your buyer if they insist

FloraMac

We are cash buyers so no problems with mortgage.
A little concerned about the system itself so think I will have an electrician check it out when we are in.
Thanks for all the advice, very helpful.

tafer2uk

We are in exactly the same position. My wife and I are in the process of buying a new house and we know the sellers installed a new kitchen including some rewiring and the installation of new appliances (gas and electric) within the last two years (the wife proudly showed it off and told us when it was installed). They also had new glazing installed too (in the kitchen).

On the property information form they have ticked 'not known' if any rewiring or electrical installation work they has been carried out since 1 January 2005 (which may be an honest mistake if their kitchen fitter provided poor advice). Although the wife also mentioned their son was an electrician.

Anyway the bottom line is they don't have any gas or electric certificates, and it also turns out they don't have any paperwork for the newly installed glazing. Their solicitor has proposed that they pay for indemnity insurance as a solution. My feeling is that we stick out for them paying to obtain the necessary certificates as my worry is primarily from a safety point of view as the indemnity policy seems to have many exclusions including personal injury/death. We are less bothered about having to replace things like appliance if necessary. Here's the solicitor's summary of what's covered and what's not.

Please note that the policy does not cover you in the event of injury or death to you or your family as a result of the works being structurally unsafe. The only way to guarantee the work is structurally safe is by having a structural engineer check the works which
were carried out.

The policy will cover:
- The cost of demolishing altering or reinstating the property,
- a reduction in Market Value,
- Costs incurred by you (with the Insurers consent), but not the actual costs of doing the work required to make the works safe.

The policy does not cover:
- work which is less than 12 months old,
- listed buildings
- where any enquiries have been made of the local authority relating to Building Regulations for the property which go further than asking of mere existence of documents
- A Property not used or occupied as a dwellinghouse in sole occupation.
- Where an enforcement notice has already been issued by the local
authority
- Where the works are subject to a dispute with any party

You must note however that:
- Cover only applies where enforcement action is taken by the council not where work is merely of poor quality
- You must pay for a valuer to assess market value
- You must apply for retrospective consent from the Local Authority only if the Insurer requires
- You must keep the parts of the property in question in safe repair
- You must not disclose the existence of the policy to anyone other than a bona fide buyer/lender/lawyer
- You must not enter into any negotiations with the LA regarding consent.

I also found this article quite interesting when doing a Google search which again makes me think we need to reject the indemnity policy.

http://www.trethowans.com/site/library/legalnews/lack_of_building_regulation_consent_why_legal_indemnity_policies

Does anybody know what certificates/inspections would be needed and their approximate costs given the above scenario? Thanks.

Hoploz

A bit of an anomaly ...
G_Ms quote states an enforcement notice cannot be served after 12 months of the work being completed.
The indemnity policies are only applicable after 12 months

Or have I read this wrong?