What Is Search Insurance In Residential Property Conveyancing?
Posted on 2nd June 2020
You may have heard your conveyancing solicitor refer to what is called search insurance, but what does this really mean for you and your property purchase? Our Preston solicitors discuss what role this can play, as part of the process.
Search insurance, as you would expect, relates to conveyancing searches, as part of the conveyancing process. The searches, usually, provide information in respect of four key areas, these include:
- Local authority search: This search provides information on planning applications, local land charges, smoke control orders, listed building consents, road adoptions, building control consents and tree preservation orders, as examples.
- Environmental search: This search looks to the environmental factors affecting the property, and reports on radon gas, contaminated land, ground stability, flood risks and planning constraints, as examples.
- Coal and Mining Search: This search discusses past, present and proposed future works in respect of coal and mining.
- Water and Drainage Search: This search confirms connections to the mains in respect of sewage and water, the location of such mains, the water and sewage undertakers, the charging basis for the same and whether there are any build over agreements in place, as examples.
See our Preston solicitors’ blog on searches, and their importance, here.
Where the above searches are not to be carried out, as part of the conveyancing transaction, there are three main eventualities in which search insurance may be incepted. These can include the following:
As it says on the tin, this insurance is a form of validating search results that have already been obtained. The search results may have been carried out no more than 24 months ago, in order to be relied upon. This is a way in which obtaining fresh searches, and paying the subsequent fees for the same, can be avoided, but still ensuring there is protection in place.
Search delay insurance can be obtained where Completion of the property purchase is to take place, before the search result itself has been received. This should be carefully considered as, should the search reveal a matter that is particularly detrimental to the property and its value, you have already legally purchased the property. Although there would be cover from the policy in place, it is imperative to consider whether this would be sufficient for you, and your personal view on the matter. Say, for example, a property purchaser owns a number of properties on the same street, and has done for many years. Where Completion is required at the earliest, the purchaser may choose to Complete the matter, before receiving the environmental search result, and to incept search delay insurance. This is satisfactory for him, as he knows the area well and the neighbouring properties, for which no environmental issues have been experienced.
No Search Required
You guessed it, this insurance may be incepted in the event that there are no searches required, as such. This insurance can be incepted in favour of the purchaser, whom has agreed to purchase without carrying out the search, or the mortgage lender, who has agreed to grant the loan without requiring a search. For example, where a property is being re-mortgaged, conveyancing searches would not, ordinarily, be part of the process. This is because the proprietor already owns the property and, therefore, should be aware of the various matters affecting it. The lender may, however, stipulate within their terms of the re-mortgage, that search insurance is incepted. You should always be sure to check the individual requirements of your lender, to avoid their offer to you being withdrawn. See our Preston solicitors’ blog, which discusses the circumstances in which a mortgage offer may be withdrawn, here.
What we would point out is that, when purchasing a property, with the assistance of a mortgage, the lender will require that conveyancing searches are carried out. This is in order that any adverse issues can be revealed and, where necessary, reported to the lender for their consideration. This is to ensure that such issues would not be detrimental to the property’s title and value and, importantly, that their security over the property is not going to be compromised. See more on your conveyancing solicitor’s duty to report matters revealed within your conveyancing searches, to your lender, here.
It is important to note that the cover of such policies, usually, relates primarily to enforcement action and the associated costs. This includes those required in order to comply with notices, court action and losses to the market value of the property, as a result.
What such insurance policies do not cover in respect of, are potential issues revealed in the search itself. For example, the search reveals the land is situated on contaminated land. Whilst the insurance may cover in respect of a remedial notice that may be served, the contaminated land would remain.
As you can see, search insurance should not be considered a ‘one fits all’ measure, and should be discussed, at length, with your conveyancing solicitor before making a decision on how to proceed.
Before incepting an indemnity policy, there are a number of items that should be checked. Use our Preston solicitors’ trusty checklist, as your guide:
- Details: Importantly, the details of the property, including the full address, and the name of the insured, should be accurate and correct. It is important to note that, indemnity policies, in most cases, cover not only the insured, but their successors in title too. This is, of course, something that should be checked.
- Limit of indemnity: This is the limit to which the policy will cover against and should, therefore, be incepted in accordance with the value of the property. Where, for example, a policy has already been incepted by the current owner of a property, and is to be passed on to the buyer, your conveyancing solicitor would be ensuring that the limit of indemnity provides sufficient cover, in accordance with the current property value.
- Insured risks: It is, of course, also important to clearly determine what is, and what is not, covered by the policy and, importantly, whether this is adequate for the risk posed. It is also important to check whether there are any restrictions on the cover, and whether the same attracts any obligations upon you, as the policy holder.
- The premium: Such polices are not, of course, free of charge, and do attract additional fees. It is, therefore, important to distinguish whom will cover the cost of the policy, upon Completion of the matter.
- Conditions of cover: Often, policies will be incepted, on the condition that various items are satisfied. Such conditions can differ, dependent on the type of policy being taken out, however, usually, include standard items such as the property being situated within England or Wales, and there being no current action pending against the property, as examples. This is, of course, something that should be checked prior to commencement of the policy.
As you can see, there are a number of factors that should be considered. Indemnity insurance should, not, therefore, be incepted without thought and consideration. See our blog, in which our Preston solicitors discuss indemnity insurance policies and their usage further, here.
So, if you have an indemnity insurance query, get in touch with our team today, at email@example.com, where our expert team can advise you on how to be a prudent policy holder.
Alternatively, if you have any other conveyancing query, submit an online enquiry today, here, where our local solicitors are on hand to assist you, and your conveyancing needs.
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