Can someone tell me about indemnity insurance?

[Teaandcakeat8]

I'm currently buying my first flat so a leasehold. The seller has owned it from new.

It's emerging throughout the process that the solicitor the seller used was not very thorough at all and as a result a lot of information is missing or incomplete. The estate agent informs me he has taken out quite a few indemnities to get to the point of exchange.

My question is, when I come to sell the flat, will these indemnities still be in place or will I be responsible for basically paying to renew them (as the original information will of course still be missing)? I think the total number has run into a few hundred pounds and I am paying the cost of the final one just to get us to exchange.

[wowfudge]

It depends why they are for, but they could well be for your benefit and any successors in title. Your solicitor should advise you. You will receive the actual indemnities once the transaction is completed and will need to keep them somewhere safe.

[Kerchoff]

Indemnities are extremely common, cheap (typically about £50), and effective. I've used them in just about all house sales, because someone forgot to apply for planning permission, or didn't have the right building regulations certificate, etc, etc.

Quite often, lack of paperwork will be made a non-issue by the passage of time (e.g. having no planning permission AND no enforcement by the local authority for 4 or 10 years, depending on the structure type, means it is lawful and cannot be pulled down.) But an indemnity, due to its very low price, is often offered anyway.

Offering an indemnity is almost universally accepted by the buying party as a means of covering the costs of any potential enforcement action arising as a result of not having the right paperwork for planning and all those issues. In fact, the clever owner will realise that buying an indemnity for the purchaser is at least ten times cheaper than getting the right certificates in the first place! More than once, I've considered indemnities the best-kept value for money secret going.

The indemnity offered by the seller to you now will cover you. It may cover successors in title, but I would expect in practice that new policies will be purchased each time the property changes hands.

Obviously, if 20 years have gone by since that planning permission, for example, was not secured and yet no enforcement has taken place, you can assess that there is no point offering as a seller - or no point seeking as a buyer - an indemnity for things that now will not happen.

In short, provided there are indemnities in place for you for each item of concern, and that your solicitor keeps and gives you copies of the policies provided, you should not consider this in any way abnormal, but what you ought to expect.