Last summer, my friend Fiona was three weeks from completion on her Bristol house when everything went sideways. The buyer’s solicitor spotted that her parents’ conservatory from 2008 never got building regs approval. Suddenly, they wanted indemnity insurance or they’d pull out. Fiona rang me proper stressed; “What even is this insurance thing and why do I have to pay for something my parents did?”
Fair question. What is an indemnity policy and why do conveyancers act like it solves everything? Turns out it’s simpler than the legal jargon makes it sound, but people get confused about costs and who actually needs to pay.
Right, So What Actually Is It?
What is an indemnity policy? Which boils down to this: one-off insurance you buy during property sales to cover specific legal problems you can’t fix quickly. Missing certificates, dodgy building work without approval, and boundary arguments nobody wants to sort out properly.
Key thing — it doesn’t fix anything. Your extension still lacks planning permission. The policy just covers your financial losses if the council decides to kick off about it: legal fees, compensation, maybe demolition costs if things go really pear-shaped. You’re insuring against consequences, not solving the actual defect.
Most cost £20–£300. Sounds cheap until you’re paying for someone else’s mess from years back.
What Is Indemnity Insurance When Buying A House, Then?
You’ve found your dream place. The survey’s sorted, the mortgage is approved, and everything’s brilliant. Then your solicitor phones, saying the seller can’t find the FENSA certificate for windows from 2012. Suddenly, you need indemnity insurance.
What is indemnity insurance, when buying a house, means protecting yourself and your lender from financial hits caused by dodgy paperwork or title issues. Your mortgage company usually insists on it — they won’t release funds if there are legal problems hanging around.
Common Situations
- Extensions Lacking Building Regs Certificates: Previous owners did the work ages ago; nobody kept paperwork. Work might be fine structurally, but legally it’s a mess.
- Missing Planning Permissions: Someone built that garden office without asking the council. Happened years back but it’s your headache now.
- Breached Restrictive Covenants: Deeds say no commercial vehicles but three previous owners ran businesses from the property. Nobody cared then, but it’s technically dodgy.
- Arrangement And Purchase: You can’t buy this yourself, as it goes through your conveyancing solicitor. They get quotes from specialist insurers and handle everything.
Selling Side: What Is An Indemnity Policy When Selling The House
What Is An Indemnity Policy When Selling The House usually means you’re firefighting to save the sale after the buyer’s solicitor spots something iffy. Maybe you knew, maybe you didn’t. Either way, the buyer wants covering.
Sellers normally pay, especially if the problem happened during your ownership or you’ve lost documents you should have. Makes sense — you’re selling property with known defects, so sort the insurance.
That said, everything’s negotiable. Sometimes buyers pay because they want the place and you’re being awkward. Sometimes you split it to keep everyone sweet. Your solicitor advises based on normal practice, but really, it’s whatever gets you to completion.
Fiona ended up paying £180 for her conservatory policy. She wasn’t happy, but losing the sale would’ve cost thousands in wasted fees and starting from scratch.
Leasehold Gets More Complicated
What is an indemnity policy for a leasehold property? It can get messier because you’ve got freeholders, ground rent, service charges, and lease terms all piling on potential problems.
Common Leasehold Policies
- Breached Lease Covenants: Your lease bans pets or subletting, but previous leaseholders ignored it. The freeholder could theoretically enforce penalties or try to forfeit the lease.
- Ground Rent Issues: What is an indemnity policy for ground rent covers situations where ground rent terms aren’t clear or there are disputes about increases. Protects buyers from escalating charges that weren’t documented properly.
- Missing Freeholder Details: Sometimes, freeholders vanished or management companies were dissolved years ago. You need insurance if someone eventually turns up claiming ownership.
Who Pays For An Indemnity Policy Anyway?
Who pays for an indemnity policy causes more arguments than you’d think. The default position is sellers pay, particularly when they’re responsible or can’t provide documents. Sometimes buyers pay because they benefit. Other times, you split it to keep things moving.
Your solicitor fights your corner, but ultimately it’s negotiation and leverage. Desperate to sell, and buyers have options? You’ll probably pay. Seller’s market with buyers queuing? You might push back.
Someone on a property forum mentioned paying £301 for a fence policy, then accidentally invalidating it by contacting the council for clarification. That’s the other thing — once you alert authorities to problems, you can’t get indemnity insurance anymore. The whole concept relies on the issue staying dormant.
How Long Does Indemnity Insurance Last?
Here’s decent news: How long does indemnity insurance last is straightforward. Most policies last your entire ownership of the real estate. You pay once, and you’re covered.
Many transfer to new owners when you sell. If your property value’s shot up since the original policy, new buyers might need to top up the premium for adequate cover. But generally, it rolls over with the property.
That’s why sellers sometimes find existing policies from previous owners. Fiona’s 2008 conservatory? Turned out there was already insurance from when the property was last sold in 2015. Nobody bothered telling her.
Building Regulations Cause Most Drama
What is an indemnity policy for lack of building regulations that covers work done without approval, or where certificates went missing? Covers legal costs if local authorities take enforcement action and financial losses like reduced property value or blocked sales.
Building control should’ve signed off on structural work, new electrics, plumbing changes, and extensions, which covers basically anything major. If paperwork’s missing, buyers and lenders get twitchy.
Enforcement limits changed recently: four years for work before 25 April 2024, but ten years for work after that date. So newer work carries a higher risk of council action, making insurance more essential. For more information, see gov.uk guidance on enforcement.
The policy won’t cover actually fixing rubbish work or injuries from faulty installations. Purely financial protection against enforcement action. If your dodgy rewiring catches fire, you’re on your own, as that’s not what building insurance covers.
How Much Does An Indemnity Policy Cost Really?
How much does an indemnity policy cost depends on property value and specific risk. Minor issues like chancel repair liability might cost £20, whilst complex planning problems could hit £500 or more.
The weird bit is premiums are based on property value rather than actual risk. A £400,000 house pays more than a £150,000 house for identical coverage, even though the legal risk is the same. Insurance companies use sliding scales — higher value means higher premium.
You can’t shop around on comparison sites. These are specialist products only available through conveyancing solicitors working with particular insurers. Your solicitor gets quotes and handles paperwork. They’ll also charge around £50–100 on top of the premium for arranging it.
When It’s Not Actually Needed
Sometimes solicitors push these policies when they’re not strictly necessary. Building work from 1995 is well outside enforcement periods and the council’s not suddenly going to care after 30 years. But solicitors prefer covering all bases, especially with lenders involved.
Other times the policy’s pointless because it won’t protect you from real risk. If structural work is genuinely dodgy, insurance won’t stop your house from falling down. You need proper surveys and specialist inspections to assess actual safety, not just legal liability.
Claims on indemnity policies are remarkably rare despite thousands being purchased annually. Most covered risks never actually cause problems. It’s cheap insurance against unlikely events, which makes some people question whether the industry’s just creating work for itself.
What It Comes Down To
Fiona’s sale went through after she paid for the conservatory insurance. The buyer moved in, loved the place, and never had issues with the council. That £180 policy will probably never get claimed, but it stopped a £20,000 loss from the sale collapsing.
That’s what indemnity policies do; they’re not exciting, they don’t solve problems, and they’re annoying to pay for. But they keep property transactions moving when legal defects would otherwise kill deals.
If your solicitor recommends one, ask why it’s needed, what it covers, and who should pay. Sometimes they’re essential; sometimes they’re just covering everyone’s backsides against tiny risks. But in a property market where chains collapse over the smallest issues, spending a couple hundred quid for peace of mind isn’t the worst idea.
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This was a very clear explanation—the way you unpacked indemnity policies makes property sales less confusing.