indemnity insurance for Flying Freehold

no.1swimmum

I'm hoping someone on here can explain this to me a little - although I have bought 2 houses in the past they were both straight forward purchases and I'm not sure about this.
My Son and his fiance are about to exchange on the purchase of their first house - all the houses down this road are the same they all have flying free hold bathrooms - i'll try to explain.  The house they are buying and next door have alleyways (although they both have doors front and back) and their house's bathroom is at the front and over both alleyways and next doors is at the back over both alleyways.  I mentioned this to the estate agent at the time of viewing but he was clueless - they are due to exchange either today or tomorrow and now their solicitor has said they need to take out 2 insurance policies (we have left a message asking  the solicitor to explain more but they are notoriously bad at returning calls)  the first to cover for planning permission which is missing for the bathroom at a cost of £250 annually , but as this  is how they were built so don't think they need this - the second is an indemnity insurance for the flying freehold, at a cost of £465 - I understand why this is needed but the solicitor recommended that the insurance is for the same amount as the purchase price of house  i.e.£450,000, my question is do they need to cover this whole amount or just part as my understanding is this insurance is to cover any damage that may be caused to next doors property caused by a leak etc in their bathroom - can someone more knowledgeable let me know if I understand this correctly and if they can reduce the cover amount to say £250,000! obviously we have no knowledge is next door has a similiar policy.
Many thanks for your help.

eddddy

no.1swimmum said:

...my question is do they need to cover this whole amount or just part as my understanding is this insurance is to cover any damage that may be caused to next doors property caused by a leak etc in their bathroom.

That's not my understanding of flying freehold indemnity insurance.

It's because your bathroom is over the neighbours property/house - so if the neighbour fails to support your bathroom - e.g. they knock their house down; or the neighbour's house burns down and they refuse to rebuild it; or the neighbour's house crumbles through disrepair - your bathroom will fall down.

So your bathroom will fall down, and you will be left with a damaged house that isn't worth as much - because it no longer has a bathroom.

In simple terms, the house is worth £450k - but if the bathroom falls down, it might only be worth £250k (as it would need repairs, redesign etc) - so the indemnity insurance should pay you the £200k loss.

no.1swimmum said:

....the first to cover for planning permission which is missing for the bathroom 

Why does the solicitor think that planning permission is missing for the bathroom?

Wasn't the bathroom built at the same time as the rest of the house? Has there been a weird misunderstanding?

no.1swimmum said:

My Son and his fiance are about to exchange on the purchase of their first house...

Often, it's the seller that pays for indemnity insurance.

But there are no strict 'rules' on this - it's a matter of negotiation.

user1977

eddddy said:

no.1swimmum said:

...my question is do they need to cover this whole amount or just part as my understanding is this insurance is to cover any damage that may be caused to next doors property caused by a leak etc in their bathroom.

 Has there been a weird misunderstanding?

Definitely some sort of misunderstandings going on (possibly not helped by it not being the purchaser telling us the story directly!).

No need for indemnity insurance for a bathroom which was part of the original construction.

Even if it is an alteration/extension, chances are it didn't need planning permission (though would have required to comply with building regulations, depending on its age).

Even if a lack of consents requires an indemnity insurance, they're a one-off premium, not an annual one (especially not at £250 a year!).

Flying freehold is more likely to warrant an indemnity policy - yes, such policies are normally for the market value of the property, rather than trying to figure out what the worst-case scenario would actually result in (though at the very least, no bathroom means the property would be unmortgageable). In reality the amount covered shouldn't make much difference to the cost.