Need for Indemnity Insurance?

McTaggus

Hi All,

Just one final hurdle before we can agree all contract terms and get to exchange on our new home - indemnity insurance. The property we are buying is two previously adjoining properties that were converted into a single property in 2001. According to the local council, planning permission and building control are not required for the conversion of two dwellings into one, however the separation of the property again into two would require planning permission.

The sellers have provided our solicitor with a letter that indicates that because the work was completed more than 4 years ago, the works have been considered lawful. However, our solicitor has stated that this is not a certificate of lawfulness and that (given timings - as the chain are aiming to complete at the end of this month and obtaining this would take weeks), that she has requested the sellers expend money on providing us with indemnity insurance. The sellers don't understand why this is necessary, as the change didn't require planning permission or building control to be involved, and has been classified as lawful due to the time that has expired since conversion (15 years). As such, they are not happy to pay out the 500 pounds this would cost them, for something they feel is completely unnecessary.

I know the solicitor is there to protect our best interests, but is this really something we have real risk exposure to? I'm tempted not to push for it, as I'm not sure that there's a risk item, but not sure if I'm being completely naive on this point and there's a real risk here that I haven't considered.

Any thoughts would be greatly appreciated, from those far more experienced in this world than I (as a hopeful FTB keen not to make silly mistakes that could bite me hard in the future………!)

Thanks in advance!

Grenage

I personally detest that indemnity policies are brought up in just about every house sale - they're a pointless waste of money 90% of the time. Would I require one? No. Should you? If you have to ask - go with your solicitor's advice.

For the record, an indemnity policy can be sorted out in hours, not weeks.

McTaggus

My gut feeling is that its not necessary and a pointless waste of the seller's money, however I just wanted to check whether this was a fair assessment and indeed whether I had missed something major

Just to clarify, its not the indemnity that would take weeks, its the official certificate of lawfulness (rather than confirmation letter from the council saying the works are considered lawful).

Grenage

Ah I see, I misread!

I was under the impression that a new entry in a wall required building control (I might soon be corrected), so I suppose it depends whether you think the job was done properly or not.

davidmcn

While the indemnity may be a pointless waste of the sellers' money, it means you then have it and nobody demands you to pointlessly waste your money in a future transaction.

(and though it may be academic, I'm not sure how you would convert two houses into one without carrying out works which require Building Control involvement)

rosyw

I was on the other side of this a few years ago, we'd converted 2 into 1 a number of years back. We didn't require planning of building control at the time, but my buyers did need it to convert back to 2!
As far as I can see the indemnity policy is a total waste of time & money, had my buyers asked me to pay for this I'd have told them that if they wanted it they must pay for it themselves, I certainly wouldn't have paid.
Judging by the numbers of people being told they "need" indemnity policies theses days my view is that most of the time they're just a nice little earner for the solicitors!

McTaggus

From my understanding, indemnity insurance doesn't cover you for shoddy workmanship though - right? Only covers if you if the council take retrospective enforcement action, which I thought had to happen within 4 years of the works being undertaken…..?

Given this, I'm wondering whether the indemnity insurance would actually be FOR anything meaningful in this instance. We had a full structural survey done, with a specialist surveyor, and he flagged no issues, an our lender isn't demanding this as a condition of the mortgage…

Just to add, if building control should have been sought, but hasn't, I understood it couldn't be retrospectively given anyway as they have to be involved from the start of the works….. So the lack of building control evidence doesn't seem to be something we can "fix" anyway

Grenage

You are correct, and it's for these reasons I wouldn't be bothered; then again, I didn't bother with a survey for the house we're buying.

As said above, you may end up footing the bill for the same in the future when you come to sell. If you've already got a policy, they're generally transferable.

McTaggus

Very true, however given the Council have already provided a letter that has stated the works are lawful, surely we could simply apply ourselves for the actual formal certificate of lawfulness in future and therefore this point and the need for indemnity for future buyers becomes completely null and void?

Grenage

I must confess to having not heard of a letter of lawfulness, rather than a certificate. Surely if it was lawful, they'd have just issued a certificate?

davidmcn

McTaggus wrote: »

From my understanding, indemnity insurance doesn't cover you for shoddy workmanship though - right?

Neither do consents from the council - they only give you reassurance that the council inspected the works at the time and won't take enforcement action. You need your surveyor to tell you whether or not the works were shoddy (or rely on the "if it hasn't fallen down in the last 15 years then it's probably ok" maxim).