Legal Indemnity Insurance

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Legal Indemnity Insurance

  • All legal indemnity risks considered
  • Property and land title & search issues
  • Restrictive covenants
  • Residential & commercial risks
  • Very competitive pricing

What is Legal Indemnity Insurance?

Legal indemnity insurance is a specific cover used in conveyancing transactions. It is useful in situations where there is some form of legal defect (for example, a missing landlord, or a lack of planning permission) that is likely to take time to resolve / is unresolvable, but which is unlikely to cause any actual loss. It can be provided for existing residential and commercial properties, as well as new site developments. Cover may be considered for pre-planning for some new developments, depending on risk.

The cover becomes effective where a legal challenge is brought in respect of a legal defect. For example, you buy a property with an extension for which there is no planning permission and some time later, the local authority serves an enforcement notice. In this situation, cover would potentially protect you from costs:

  • The legal costs incurred in defending the claim
  • The reduction in value of the property as a result of successful enforcement

How does Legal Indemnity Insurance cover work?

Unlike most insurance policies, which run annually, with Legal Indemnity Insurance you usually pay the full amount in a lump sum, upfront. However, the cover stands forever in most instances. It can be purchased to cover a range of potential issues (see below) and can be tailored to suit the specific circumstances (for example, with a flexible indemnity limit).

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Legal indemnity insurance

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Who needs Legal Indemnity Insurance?

Anyone who is looking to purchase or is in the process of purchasing a property where there is a potential legal defect should consider the benefits of Legal Indemnity insurance. It can be taken out by the purchaser, or where there is a mortgage involved, the cover can be taken out jointly by the owner and the mortgage provider.

It’s a worthwhile consideration for all property types, both commercial and residential, because a property is typically a substantial investment. What would the impact on the value of the property be if, using that earlier example, you were required to remove an extension? What would the impact be if a key access point became inaccessible?

Why choose BJP Insurance to buy Legal Indemnity Insurance?

With many years of experience placing insurance for the construction sector, the experienced broking team at BJP Insurance Brokers can provide you with support and advice for all your legal indemnity insurance needs.

Both commercial and residential situations can be sourced, but increasingly careful underwriting regard is currently given to anything of a commercial nature bearing in mind the current economic climate.

Please call Brogan Welborn or Emma Hunt now on 0118 979 2121 to discuss how we can help you.

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Various Legal Indemnity Insurance Cover Available

Most common problems affecting title, and often development sites:

  • Restrictive covenants (freehold and leasehold)
  • Lack of Easement access/services
  • Interference with third-party rights such as rights of way, services, mining rights
  • Ownership problems relating to title – adverse possession, registered possessory title

Other standard problems can include:

  • Chancel Repair
  • Flying Freehold
  • Insolvency Act
  • Maisonette Indemnity
  • Search Covers (validation, re-mortgage, search delay /no search)
  • Absent Landlord
  • Planning Permission and Building Regulations
  • Good Leasehold Title and Lost Title Deeds

Other less common problems include:

  • Village green applications
  • Judicial review of planning
  • Mines and Mineral Rights

Planning permission is initially obtained although it is possible to consider pre-planning risks provided there is enough information about how the site is to be redeveloped, the full developed value, and provided the risk is generally considered to be suitable for a pre-planning risk e.g. non-contentious development, not a particularly exclusive/high value area, old covenants, the covenants may be unenforceable, other established breaches.

Post planning cover is only generally available

Most insurers will consider offering cover purely for judicial review of planning.

Commercial, residential and development sites. Large areas of land can be considered. Some underwriter’s limit would be approximately 15 acres in a single site.

Cover is usually limited to the cost of repair and there is seldom cover for “loss in value”. Standard period of cover is 25 years commencing from the Policy Date or, for a Lender, the full term of any mortgage granted during the 25 year period commencing from the Policy Date.

Cover is available for projects for residential and commercial properties where the appropriate consent is not obtained for alterations over 12 months (less than 12 months is possible if not major works).

Cover can be hard to source for listed buildings. It very much depends on the quality of the building, the area, the nature and age of the works i.e. are they in keeping and did they replace on a “like-for-like” basis.

It is not generally appropriate to substitute insurance where wholly inappropriate work has taken place on a listed building. It is therefore difficult to find cover for a grade 1 listed building/an important building.

Lack of planning consent for use is not normally a problem, although careful consideration is given to any enquiry where a property has been converted from a house into flats or a building has been converted for use as a single house or is used for commercial use without the appropriate planning consent.

These are no local search purchase (including delay), no local search re-mortgage (lender only cover), local search validation (on old searches up to 18 months old).

Provided the property is an existing residential or commercial property, there should be no problem in sourcing cover.

Generally these are obstruction of third-party rights of way, third-party mining rights, possible other rights such as manorial and “unknown rights” mentioned on titles where deeds are lost.

There is a general exclusion in respect of existing services (pipes, cables) which may exist beneath the site or rights of way which are currently being exercised. We occasionally see risks relating to potential prescriptive rights (e.g. dog walking through unfenced land) which can be considered usually once planning permission has been obtained and, if practical, the land has been fenced off for several weeks without complaint prior to the insurer assuming risk.

For existing residential properties we can usually source covers of absent landlord, existing breaches of covenants, contingent buildings insurance, maisonette indemnity with a number of variations to bespoke cover as required.

Similar problems can affect commercial properties, but these are mainly restricted to old leasehold covenants and generally where there is an absent landlord in addition. It is difficult to source cover for intended new breaches of leasehold covenants on commercial or residential properties where there is an active landlord.

In general we find it difficult to source cover where the lease stipulates that the property is not to be sub-let unless there were some exceptional circumstances e.g. the landlord was insolvent/truly absent.

We do occasionally see requests for cover for new development sites subject to “old” leasehold covenants (and usually held under 999 year leases) and these can be placed on the basis that the landlord is absent.

Irrespective of whether the main title is leasehold or freehold, we can source this cover. These mainly relate to “adverse possession” type risks but many other types of situations can be considered where the title is uncertain e.g. Good Leasehold Title, lost deeds, etc.

For development sites cover prior to planning can be placed if needed.

This cover applies to existing residential/commercial or new developments and activates when an access to a property (including utilities) cannot be established. Cover extends to loss in value and costs of sourcing alternative access. The only situations we would need to try various markets to find a fit, is where it is an intended new development and:

  • The owner of the access is known such as where access is registered (there may be the odd exception e.g. owner probably deceased/in liquidation)
  • The access is over a village green/common land

For development sites, planning permission is generally required to be obtained first.

Cover is available for both residential and commercial properties and cover provided when a third party exercises their right to extract minerals where their interests are listed on the title document.                                                                                                                                                                                                                                                                                                                                                                                

Cover for both residential and commercial properties available. Cover is available up to 30 years.

Policy wordings are generally applied to cover Sections 339-342 although we have sourced cover for company transfers re Sections 238 – 241.