What is Indemnity Insurance when buying or selling property?
Defective title indemnity insurance protects property owners and lenders from financial loss due to historical, unresolved issues with a property’s legal ownership (the title), such as missing deeds, boundary disputes, or planning consent irregularities, by providing a one-off payment if a claim arises, rather than fixing the defect itself. It’s a common, cost-effective alternative to resolving complex title issues, often arranged during conveyancing, and covers potential future claims for a one-time premium.
What it generally covers:
- Missing documents: Incomplete or lost deeds, planning permissions, or certificates.
- Boundary issues: Disagreements over property lines or lack of rights of way/services.
- Unregistered land: Properties not formally registered with the Land Registry.
- Planning/Building Consent: Unapproved alterations or works.
- Historic errors: Gaps in ownership, fraudulent transfers, or unclear historic rights.
How it works:
- Protects against loss, not the defect: It doesn’t fix the underlying problem but compensates if the defect causes financial loss or a legal claim.
- One-off cost: A single premium covers the policy, usually paid by the seller, and can last indefinitely drawn up by the Solicitor for either party and agreed with the other.
- Covers all parties: Protects the owner, future owners, and the mortgage lender.
- Lender accepted: Widely used and accepted by UK lenders as a pragmatic solution.
When it’s used:
- When a title defect is identified during a property sale that cannot be quickly or easily remedied.
- To avoid delays or cancellation of a property transaction.
- To satisfy lender requirements for a mortgage.
In essence it is the paracetemol to solve 99% of all legal headaches and is generally required in 60% of all property transactions in the local area.