Indemnity insurance

happybunny_4

I'm a newbie to this thread and need some help please. We are currently selling our house and the environmental search has found we are a 'flood risk' because our house is within 500 metres of the canal. Our buyer's solicitor will not pass this and now wants us to take out indemnity insurance.

Does anyone know what this is and how it works? I have looked it up on the internet, but can only find indemnity insurance for businesses.

Thanks a lot!

RiskAdverse100

If this is really what your buyer's solicitor is saying then he is being unreasonable and a little bit silly.

You cannot take out indemnity insurance against a flooding risk such as this. What does the solicitor think buildings insurance is for?

Indemnity insurance is needed for very specific legal risks that are not covered by general insurance. For example, if the access to a house is down a private drive but the deeds do not say that the property has a right of way over this then you can take out indemnity insurance. This would pay up if the real owner of the drive appeared and tried to stop access. The insurance company would negotiate and agree a formal right in return for a one-off payment.

I would ask your solicitor to suggest in very polite terms that indemnity insurance is not approprite for a risk of this kind and no doubt his clients are going to take out buildings insurance on completion which will cover it.

If you are interested in finding out what indemnity insurance of this kind is you could look at https://www.countrywidelegal.co.uk

RiskAdverse100

happybunny_4

Thanks for your answer. I did a bit more investigation and it appears that not only is our house a 'flood risk', but the housing estate was built on the site of a chain fence factory and the environmental search brings up a risk of contamination!

Our solicitor has obtained a letter from the council stating the contamination risk is low and has also obtained the planning permission documents for the building of the estate which doesn't show any contamination.

Is it still worth taking out Indemnity insurance?

Thanks

RiskAdverse100

It is possible to take out insurance to cover the possibility of the land being contaminated. It is for the buyer's solicitors to take out the policy although the seller is often asked to make an allowance of the premium on completion.

The premium should not be too high.

RiskAdverse100

Davids

I sold last year and the buyer was concerned that the chimney breasts had been removed. I had heard of indemnity insurance so I asked the solicitor about it. The solicitor said the policy pays for repairs if faults appear after you've sold.

The solicitor quoted me about £70 for the policy.

When I got the final bill, I had paid nearly £200. I asked to see the policy, but the solicitor said it had to stay with the deeds, which had gone to the lender.

I bought another house with a new extension. There was no record of planning or building regs so I told the solicitor to ask the seller to provide an indemnity policy.

I've got the deeds, but there is no policy and I must follow this up.

Summarising: These policies are paid for by the seller, who never sees them, arranged between the solicitor and an unknown insurance company and they stay with the deeds. I smell a rat.

I think our MONEYSAVING EXPERT should investigate this.

RiskAdverse100

Two issues here.

When you sold last year you had to pay for an indemnity insurance policy that protected your buyer. There was possibly a clause in the contract to say that you would give the buyer an allowance on completion for the premium payable. Alternatively this could have been agreed between the two solicitors in a letter.

You would never see the policy documents though as the policy would have been taken out by your buyer's solicitor and put with the buyer's deeds.

However, if you solicitor told you that a building regulations indemnity policy pays for repairs if faults appear after you have sold then he is very wrong.

Such a policy only pays out if the local authority's building control department find out that building regulations approval has not been obtained and serve an enforcement notice on the property owner telling them to do works or start injunctive proceedings telling them to stop works. The policy will most certainly not pay out for repair works if the remaining part of the chimney starts collapsing!

Most enforcement action takes place within a year of works being done without building regulations approval and so, if your chimney breasts were removed many years ago, action by the local authority's building control department now is highly unlikely.

Many solicitors are absolutely ignorant about the value of certain indemnity insurance policies and their clients end up suffering by paying for policies which are completely useless under many circumstances.

In your case the buyer's solicitor should have arranged for a structural engineer to investigate to make sure that the remaining chimney structure was properly supported above the level where the chimney breasts had been removed. If proper support was not in place you should have been asked to make an allowance on completion to cover the costs of remedial works, not a completely unnecessary indemnity insurance policy.

On your purchase, your solicitor I assume obtained an allowance on completion from your seller to cover the cost of an indemnity insurance policy that was to protect you.

In fact these policies protect lenders in the first instance although they are always worded so that the insured are the lender, the buyer and anyone they subsequently sell the policy to.

For planning permission, the local authority's planning department has a much longer period to take enforcement action where work has been carried out without planning permission. This means that indemnity insurance policies that cover planning breaches are sometimes needed where the work was completed within the last few years. Work needing planning permission is usually far more visible and so there is a better chance of the local authority finding out about it!

If you have never seen the policy documents then it is possible that they had to be sent to your lenders. You do say that you have the deeds though. Ask your solicitor about this. Lenders nowadays have seriously cut down on the number of documents that solicitors have to send them following completion. Some lenders don't require any documents at all (in which case they can all be sent to the buyer) although the majority do at least want to see proof in the form of official copy entries of the title registers that their mortgage has been registered and that the buyer is shown as the owner.

Some indemnity insurance policies are needed but they do have to be used with care. Yes, sellers have to pay for them and never see any policy documents although there is little you can do about that! I don't think there is anything dodgy going on in most cases though. Bearing in mind that insurance policies of this kind are now regulated by the FSA there are regulatory steps that solicitors have to take when arranging insurance for clients which are time consuming and which most solicitors will only undertake if they really have to.

RiskAdverse100

Davids

Many thanks for your clear explanation. The chimney work had been completed in the 1980s and I had the architect's plans. They still insisted on the policy.
The new house has no mortgage, so I have contacted the solicitor, who says the documents are archived. Looks like these indemnity policies are a nice little earner for someone and open to mis-selling. Presumably the solicitor is on a commission?

RiskAdverse100

If your solicitor appears to be unwilling to send you the deeds then, in order to satisfy yourself that nothing dodgy has gone on, write to him insisting that they are retrieved from wherever they are stored and sent to you. They are your deeds and if you have no mortgage then there is no acceptable reason why the solicitor would not want to release them......Unless of course he took money for an insurance policy but never paid the premium. If this did happen then you must make a complaint first to the solicitor himself, then to the Senior Partner if this does not resolve i and, finally, to the Law Society.

You can find the name of the Senior Partner on https://www.solicitors-online.com and the way in which to complain to the Law Society about a solicitor is on https://www.lawsociety.org.uk

I cannot imagine that there is much scope for solicitor to earn fat commissions out of indemnity insurance policies as they are not regularly taken out and the premiums are usually fairly small. But I suppose there is scope for them to pocket the premiums in some cases where no mortgage is involved and they try and retain all deeds and documents following completion.

RiskAdverse100

Davids

Thanks again. I have the deeds (First posting, 03/07 line 9).
I emailed the solicitor about the indemnity policy. They replied, (Pasted)

"I would have thought I had included the policy with the papers sent yto yoou after title was registered.If necessary it should be possible to get a duplicate policy."

I have these papers intact as mailed and there is no enclosure apart from the title deeds.
This is a reputable, local company and I am sure that it will turn out to be an administrative oversight on their part. I will ask them to look into it.

We did suffer at the hands of an incompetent/dishonest conveyancer about twenty years ago.
They are still practicing, still messing up clients transactions, losing documents, causing chaos and charging exhorbitant fees for 'sorting it out'.