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Conveyancing Defects: The Solutions Are Out There!

View profile for Paul Hajek
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conveyancing defects and indemnity insurance solutions

Your Conveyancing Solicitor has identified a problem with the sale or purchase of your house

What to do?
In an ideal world, your
Conveyancing Solicitor would have the time and the resource to fix the problem with further investigation and snazzy detective work.

In the real world, your sale or purchase is likely to be linked to a series or a chain of conveyancing transactions. The pressures are such that time to investigate a lasting remedy are limited or too costly

So what happens next?

Well, depending on the type of defect, your Conveyancing solicitor may be able to rectify the defect for you, or increasingly, he or she will likely reach for Conveyancing or as it is more commonly called Indemnity Insurance as the line of least resistance.

What Happens When a Defect is Discovered?

Some defects in title are relatively easy to solve e.g. where there is a sale by an individual but the property is still in the names of that person and a deceased. Here, the process can be  simple and your conveyancing Solicitor would ask for a either certified copy death certificate or approach the relevant Probate Registry if one cannot be located.

Where a road or footpath is not adopted by the Local Authority but, there is evidence of  long standing usage, the Seller may be asked to swear a document known as a Statutory Declaration.

The Statutory Declaration will detail actual personal knowledge of circumstances which have existed over time.

Some situations, if the original parties are contactable, may require fresh deeds to be drawn up called Deeds of Rectification.

Defects are not just limited to problems with the legal title to the property but can also involve a lack of documentation or the potential for a liability not yet discovered such as a Chancel Repair Liability.

This is where Conveyancing Indemnity Insurance would be used.

What Types of Indemnity Insurance Are Available?

There are 15 or so commonly used Indemnity Insurance Policies.

It might be that in Conveyancing terms you have been naughty (however unwittingly) by failing to comply with current planning laws or building regulations. There has been much legislation over the last decade making certificates a legal requirement from qualified contractors for electrical works, central heating and new windows.

You may also have done something to your property in contravention of a covenant over the property.

Positive and Restrictive Covenants

Covenants fall into two categories; Restrictive Covenants and Positive Covenants.

Firstly, and more commonly, restrictive covenants e.g. can restrict your ability to add or amend the property without a third party’s consent, or even in extreme cases an absolute ban on doing anything to the property.

Secondly, positive covenants where the Seller of a property has failed to carry out an obligation e.g. to maintain a fence or boundary.

Where you are buying a property with a mortgage, your Lender may insist upon a policy before agreeing to release the mortgage advance.

Solicitors have an exemption under the Financial Services and Markets Act of 2000 where they are allowed to arrange indemnity policies where the activity is incidental to a Conveyancing transaction.

Conveyancing solicitors normally arrange the indemnity policy themselves under a self certification scheme for straight forward issues. For more complex issues the Conveyancing solicitor would write a report setting out the facts and sending it to special underwriters.

The premium is a single premium and not a recurring yearly premium, typically between £250 and £500.

Are Conveyancing Indemnity Insurance Policies All They’re Cracked Up To Be?

A defective title indemnity policy is like a sticking plaster; in the majority of cases it will suffice and the pain will eventually go away.

But there are also a few issues that you should be made aware of:

- The policy may only run for a specific period of time.
- The policy is confidential and may only be disclosed to prospective purchasers, their mortgagees and their respective legal representatives. This is to avoid in the Insurers’ eyes “people coming out of the woodwork” and making claims.
- The policy may be avoided if there is a change of use of the property e.g. residential to business use.
- You will not be covered for the full amount you paid for the property, but merely the adverse difference in the market value of the property

Can You Rely on Conveyancing Indemnity Insurance Policies?

Conveyancing Indemnity Policies are not a perfect solution, but nevertheless they may be an adequate solution.

As an aside I attended a conference of about 350 Conveyancing Solicitors in 2011 where the attendees were asked had they known of a situation where a Defective Title Indemnity Policy had paid out.

Not one hand went up!

So there you are as fairly clear as mud.

Good news is if your Conveyancing Solicitor is good at solving problems it should not cause too much delay.

P.S. You can hear me discuss Indemnity Insurance on BBC iPlayer on Radio 4’s You and Yours which was broadcast on Monday 10th November. Hurry whilst stocks last!

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