A Guide To: Title Indemnity PoliciesSam Sharratt
Title Indemnity Policies (also known as defective title cover or legal indemnity cover) are often used during the conveyancing process where a title defect is found with the property. A title is considered to be defective where there is a potential for a third party to establish a right or interest in the property which could either have a negative effect on the title or result in the owner losing the title of the property altogether. This can include anything from an absence of planning permission for any work carried out on the property, missing or lost title documents, a breach of a restrictive covenant to a lack of formal rights of access to the property.
In appropriate circumstances, an indemnity policy can often be the most cost-effective and efficient way to deal with a title defect. It is a low-cost resolution that does not result in any delay, any adjustment in sale price or prejudice. The policy will protect the owner of the property (and the lender, if applicable) from the cost of defending any litigation, should a claim or enforcement be attempted.
The policy will become effective after the payment of a one-off premium. The premium will usually be calculated based on the value of the property and the nature of the defect. Another benefit of using an indemnity policy is that they are usually automatically transferred to any future owners of the property and their lenders.
Although indemnity policies are commonplace in many conveyancing transactions, there are a few things worth considering before proceeding.
Title indemnity policies do not remedy the title defect itself. Indemnity policies only deal with defending enforcements.
If a potential claimant under the indemnity policy is notified of the title defect, this will most likely result in the policy being invalid. For example, if the property has been altered without planning permission, no contact with the local authority should be made in order for the policy to remain valid.
The policy used will cover the property in its current position when the policy is purchased. It will not apply to any title defects that arise after the policy is purchased, even if they come under the criteria of the policy. It may be possible, however, to purchase another indemnity policy for this title defect.
If you wish to find out any more information regarding title indemnity policies or how one of our experienced Property Solicitors can assist you further, please contact our Client Service Advisors.