What is building regulations indemnity insurance?

What is building regulations indemnity insurance?

You’re most likely to come across building indemnity insurance during a house sale or purchase.

It’s a type of policy that’s sometimes recommended by conveyancing solicitors because work has been done to the property, such as an extension, but there’s a concern from the local authority over lack of evidence that building regulation consent was granted.

Indemnity insurance for planning permission is available too if you don’t have the documents to prove that planning permission was granted.

Do you need an indemnity policy for ‘lack of building regulations approval’?

A building indemnity insurance policy is often requested by the buyer’s solicitors if there’s no certificate showing that the appropriate building regulations process has been followed.

The indemnity insurance is designed to protect the new property owners (and subsequent owners) against legal action if the local authority serves a building regulation enforcement notice.

The local authority can force the owner to alter or remove any work that doesn’t comply with building regulations. The insurance can cover the legal costs or fees associated with this.

What types of work need a building regulations certificate?

Some of the types of building work that may need proof of consent from the local authority include:

• new windows
• extensions and loft conversions
• removal of walls or chimney breasts
• gas or electric installations

You may need a lack of building regulations indemnity policy if you’re buying or selling a property that’s recently had work done and there’s no evidence that it meets building regulations.

What does a building regulation indemnity policy cover?

If the local authority issues an order against you for not meeting building regulations, this type of indemnity insurance covers you for costs incurred as a result of the order, including:

• expenses
• compensation
• damages

It can also cover you for loss of property value caused by a local authority order.

What isn’t covered?

Building regegulations indemnity insurance doesn’t usually cover policy holders for:

• injuries caused by faulty building works that don’t meet regulations
• future losses incurred by property sellers if buyers want building works retrospectively signed off

Why do people buy building regulations indemnity insurance?

In practice, building regulations indemnity insurance is very rarely claimed on and some people question how useful it really is (it wouldn’t, for example, cover the cost of putting any work right). However, many people agree to buy a policy so that a property transaction can progress.

If you’re selling a property, you may find that the buyer’s solicitors and the mortgage lenders insist on indemnity insurance for building regulations being in place before the sale can go ahead.

If you’re buying a property, your conveyancing solicitor may advise that there’s a policy in place before you go ahead with the transaction.

Remember, once any building work has been completed for a full 12 months, the local authority can’t force you to alter or remove non-compliant work (according to Section 36 of the Building Act 1984).

How much does building regulations indemnity insurance cost?

Your conveyancing solicitor will usually be able to help you get a building regulations indemnity insurance quote.

Most policies don’t cost more than a few hundred pounds, but will depend on:

• the value of the property
• the work that’s been carried out

Sometimes the buyers pay as they’re the ones who will benefit from the policy, but sometimes the sellers pay as they’re the ones lacking the building regulations paperwork. Often, the cost is split between the buyer and the seller to move the sale forward.

Unlike other types of cover, indemnity insurance for building regulations only needs to be bought once. The policy will usually continue to remain valid, with no expiry date.

This means that it will cover future owners of the property as well, and the fact there’s a policy in place may make the conveyancing process a little smoother when the property next changes hands.

Buildings regulations and planning permission are complex subjects. If you’re unsure of anything, you should get in touch with a planning expert or your local authority. Please use this article as a guide only.

What other types of insurance do landlords need?

If you’re buying a rental property, you’ll need to consider insurance covers such as:

• Buildings insurance
• Contents insurance
• Property owners’ liability insurance
• Loss of rent insurance
• Fixtures and fittings insurance
• Accidental damage insurance
• Alternative accommodation insurance
• Unoccupied property insurance
• Legal expenses insurance
• Home emergency insurance

Useful guides for buy-to-let landlords

• Best buy-to-let areas in the UK
• What is capital gains tax? A guide for landlords
• The ultimate guide to buy-to-let property investment in the UK
• Buy-to-let mortgage rates explained