Should you obtain a draft indemnity policy in conveyancing?

Is your property purchase currently stuck on a technicality? Then taking out an indemnity policy could be the answer. This type of insurance involves a one-off payment for a policy that then lasts for the life of the property. It offers protection against future problems including action by the local council. But do you need to obtain draft indemnity during conveyancing?

What is indemnity insurance?

Indemnity insurance covers problems relating to the building itself – or the title or deeds – that may never be resolved. It’s taken out by the seller and covers the life of the property. If the conveyancing process has thrown up a series of quirks that threaten to derail your sale, your solicitor or conveyancer may advise you to take out indemnity insurance as a quick way to resolve the issue and get the conveyancing process back on track.

Who’s covered?

The buyer and the mortgage lender are covered against any loss of value in the property. Most sellers are more than willing to pay the one-off cost of insurance to ensure a sale. Your solicitor or conveyancer should be able to advise you of a policy that covers your needs.

What’s covered by indemnity insurance?

• Planning permission – if any documents are missing, you may be advised to take out indemnity insurance rather than try and retroactively satisfy the planning department.
• Restrictive covenants – if you’re buying a property where a restrictive covenant has been broken, for example where an outbuilding has been built.
• Absence of easement – indemnity insurance can cover disputes over rights of way to your property.
• Insolvency Act – where a gifted deposit is required, this covers against any threat of bankruptcy and loss of sale.

Do I need indemnity insurance?

Not always, particularly when the problems are associated with planning permission as the local authority time limits on enforcement notices may have passed. However, it may be an advantage to use a solicitor with specific local knowledge to advise you regarding indemnity insurance. Although indemnity insurance isn’t always necessary, in practice it can be a quick and affordable way to correct a defect that otherwise may derail the entire purchasing process