Is Indemnity Insurance For Building Regulations Compliance Worth It?
Posted on 18th March 2020
Throughout the Conveyancing transaction, it is not uncommon for the involvement of indemnity insurance to be present. More particularly, policies pertaining to lack of Building Regulations consent and compliance are those that our Preston solicitors deal with on a daily basis.
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What are Building Regulations?
Building Regulations are a set of prescribed regulations, that are adopted by local councils, on how certain works are to be carried out. The aim of these regulations is to ensure that works carried out are safe and to protect the health and welfare of those using and residing in them. The regulations also make provisions to ensure that works are conservational, in order to promote sustainable development within the current climate.
Some works can be exempt from Building Regulations, such as routine maintenance and repairs to your property. It is, however, always worth checking this with the local authority to ensure there are no issues at a later date.
The contractor carrying out the works should be accordingly registered with the local authority, in order to be compliant. Upon completion of the works, they will provide you with a Certificate for the works, as confirmation of compliance.
Our Preston solicitors understand that pieces of paper and information can go missing and when it comes to selling your property, in some cases, evidence of Building Regulations compliance may simply not be available. This brings us to the uses of indemnity insurance.
What is indemnity insurance and what does it cover?
Indemnity insurance can be put in place by your Preston solicitors in order to protect against a range of adverse risks that a property may be subject to. In this blog we are, specifically, looking at policies which relate to lack of evidence of Building Regulations and compliance, however, see our blog on indemnity insurance, in which our Solicitors in Preston discuss further occasions in which the same may be required.
In respect of Building Regulations, policies can be incepted to cover against enforcement action, in the event that an injunction is sought, where works have been conducted without any such Building Regulations consent.
There are a number of reasons why such policy may be suggested, for example:
It may be a simpler option, as opposed to seeking retrospective consent, obtaining regularisation certificates, or tracking down the original contractor for confirmation as to whether the works are Building Regulations compliant. Whilst our solicitors in Preston are never ones to take the easy way out, and enjoy getting our hands dirty (not quite literally, given the current uncertainty surrounding COVID-19), in some cases this may simply not be possible. Taking out a suitable indemnity policy may, therefore, aid in resolving the issue.
The policy could, in addition, be much cheaper than making retrospective enquiries. Our Preston solicitors can obtain quotes for such policies, for the approval of our clients. The policy premiums depend on the property value, and the amount that the policy is required to insure against. For example, a policy to cover a property value of £200,000.00, would cost £40.00.
The policies are in place and apply to not only the current owner of the property, but their successors in title, in addition. The effect of the policy, therefore, runs with the property and provides a one-off solution to what, in some cases, could have problematic consequences. Our Preston solicitors would refer to one particular instance, in which this was the case:
The case of Cottingham v Attey Bower and Jones of 2000 illustrates the importance of such policies. In this case, building works were carried out to form an extension at the property concerned. This was picked up by the conveyancing solicitor acting for the buyer, who asked for evidence of Building Regulations compliance in respect of the same. The seller’s solicitor advised that the works were carried out many years ago and, as such, the evidence was not available. The buyer’s solicitor accepted this, and took no further action in respect of the same.
The reasoning behind the same was that, following the expiry of a twelve-month period, after the works have been completed, the risk of any enforcement action is slim. Albeit slim, the risk is still there, which is what this controversial case confirmed.
It later transpired that the extension works at the property had been carried out without Building Regulations consent, placing them in breach of the same. In order to remediate the same, the new property owners would be faced with a large bill. The property owners claimed that they were entitled to damages and the Judge, indeed, agreed. The buyers were awarded damages of over £8,000.00.
The case importantly illustrates that, although the likelihood of any related enforcement action, as a result of the breach, is low, the local authority is still able to seek an injunction following the twelve month period. This brings us back to indemnity insurance…
At MG Legal, we would always insist that, in such instances, indemnity insurance would be provided by the seller. Where, however, such request is absolutely declined, our Preston solicitors would then advise taking out the policy in any event, to ensure there are no potential surprises to come in the future, in connection with works that would Building Regulations consent.
If, therefore, you have been asked to provide or consider an indemnity policy regarding Building Regulations, consult the advice of your solicitors in Preston as to the importance of the same. Get in touch with MG Legal’s Preston solicitors today, at property@mglegal.co.uk.
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