How much is an Indemnity Policy

poolf01

Hi, some general advice is needed!

I am in the process of buying my first home and have just received confirmation from my solicitors to say that the deeds are missing an Indemnity Policy. Basically the house I'm looking to buy has a shared alley way at the bottom of the garden and access to this isn't referred to in the deeds. My mortgage offer is on the condition that I have an indemnity policy and the vendors are refusing to supply it / purchase one.

My solicitor has advised that should the vendors refuse to pay for it, I may have to fork out the cash. I'm now a bit confused and would be grateful if anyone could answer my questions....

1.) should the vendors supply this policy?
2.) how did the vendors manage to purchase the property in the first instance without this policy?
3.) How much does an indemnity policy cost?
4.) What is the purpose of an indemnity policy?
5.) What happens if I proceed with the purchase without it?

Thanks

Romani_Ite_Domum

poolf01 wrote: »

Hi, some general advice is needed!

I am in the process of buying my first home and have just received confirmation from my solicitors to say that the deeds are missing an Indemnity Policy. Basically the house I'm looking to buy has a shared alley way at the bottom of the garden and access to this isn't referred to in the deeds. My mortgage offer is on the condition that I have an indemnity policy and the vendors are refusing to supply it / purchase one.

My solicitor has advised that should the vendors refuse to pay for it, I may have to fork out the cash. I'm now a bit confused and would be grateful if anyone could answer my questions....

1.) should the vendors supply this policy?
2.) how did the vendors manage to purchase the property in the first instance without this policy?
3.) How much does an indemnity policy cost?
4.) What is the purpose of an indemnity policy?
5.) What happens if I proceed with the purchase without it?

Thanks

I had something similar with my last house. My understanding:

1) Yes if they want to sell the house. Mine did.
2) May have not been an issue when they bought it.
3) Around £200-£300
4) It's a type of insurance to cover a legal dispute that could devalue your property.
5) You would have to look at the worst case scenario. I.e if somebody tried to lay claim to the land that had the ROW then how much would it devalue the property and how much would you be prepared to pay in legal fees to fight the case.

poolf01

Thanks for this! I feel more reassured now.

Richard_Webster

Is it a terraced house you are buying?

Is this access outside of but accessible from the back garden?

Is it only capable of being used for pedestrian and not vehicular access?

Do you have access to a public road from the front of the house?

If the answer to all the four questions is "Yes", I can't see what the fuss is about. There are plenty of terraced houses with no rear pedestrian access at all and I'm not sure that they are worth less just because of that. This is purely a secondary access and I can't for the life of me see why a lender would be concerned about it. Sure it may be useful to avoid bringing a lawn mower through the house or something like that, but not being able to use it wouldn't really be a disaster would it?

Obviously if there is NO other access at all, or the alleyway is used for vehicles and a selling point of the property was that there was off street parking in the rear garden, then this could be important.

If my assumptions are correct and it is purely a secondary pedestrian access I would ask your solicitor where exactly it is in your mortgage conditions that it says that it is a condition that you must have a right to use it.

If the lender specifically mentions it in it's offer wording, then your solicitor would have to write to the lender pointing this out, and asking for the condition to be removed. If they use their common sense (which they generally do not have) they will realise its existence or otherwise is of little consequence in valuation terms. Lenders being large bureaucratic organisations it could take some time to get a reply,. so the insurance policy option might be needed depending upon how quickly you wanted to proceed. The cost is roughly as mentioned in the last post. It is based on the value of the property as a whole, so £300 would give cover up to £350K with one major provider.

If it is only given a passing reference in the valuer's report then it depends a bit on what he suggests the solicitor should check. If he merely mentions its existence and doesn't recommend any legal checks about it then I would not think it was significant and I would ignore it completely.

poolf01

The answer to all 4 questions is yes, so from what you're saying, is this not really something that I should worry about. I've heard the term "easement" being thrown around - meaning that if the alley has been used by the houses in question for years - then an indemnity policy is not necessary. Is this something I should be querying with my solicitor?

Richard_Webster

For the Land Registry to register a right of way (easement) over the alleyway linked to the property's title you would have to show 40 years use by occupiers of the house as of right without obtaining anyone else's permission etc. If 20 years can be shown then they will register something but the way it is worded is less definite.

If your seller can provide sworn statements (statutory declarations) from him and may be some neighbours who have lived nearby for ages then they might be able to prove this. The thing is though that as it is a secondary pedestrian access, the seller is hardly likely to want to go to that trouble.

There's no great reason for you to be worried about it but it might be that your lender has required it to be checked. Unfortunately lenders impose quite detailed rules in the Council of Mortgage Lenders Handbook about what solicitors have to check, so your solicitor may feel he has to check the point even if you are not bothered.

The point is that you need to get your solicitor to tell you very clearly why it is a mortgage condition that a legal right to use the alley has to be shown, i.e. where in the paperwork. There could be an issue caused by lender/valuer stupidity, or it could be that your solicitor is being too cautious.

Badger_Lady

Assuming you need the policy (which it sounds like you don't):

In any situation like this, I'm sure that the vendors' solicitors have to obtain the policy because the house still belongs to the vendors. If they are really unwilling to pay for it (which is fairly ridiculous in the circumstance), they can set the condition that you will reimburse them on exchange.

Of course, this then leaves the vendors liable for the charge if exchange isn't reached, but at least they've paid for something on their own house, which they can then use when they do sell!

If you were to pay for one now, on someone else's house, you have no guarantee that the house will become yours in the future. It would be no use to you whatsoever.

This isn't a professional opinion (I'm no expert), just a personal one...

poolf01

I've just had a call from the vendor to say that they have sworn an affidavit to say that there is access to the alleyway at the bottom of the garden. Apparently they had to pay a small fee. What does this affidavit mean and why have they had to do this?

Richard_Webster

Probably not an affidavit but a statutory declaration (but to be fair they are very similar). A lot of indemnity insurers require one of these before they will give a lack of access indemnity policy.