Should you get building regulations indemnity insurance
14/12/2018
69,513
6 min read
When you are buying a property which has had unauthorised building works on it, building regulations indemnity insurance is one option to protect you from the related risk and keep your mortgage lender happy. It can be obtained from just £10.00.
The cost of buying possessory title indemnity insurance varies depending on the insurance provider and the value of the property. Indemnity insurance can't be purchased by you directly through the insurer as it requires the terms to be explained to you by a solicitor.
You should speak to your own solicitor to organise you a quote from the indemnity insurance provider.
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Common types of work that require building control sign off are:
- Installation of a boiler
- Removal of a chimney breast
- Removal of a load bearing wall
- Installation of double glazing
- Installation of electrics
- Extensions - both permitted development and larger extensions
- Loft conversions
The question for the buyer is whether indemnity insurance is the best solution when the building works undertaken by the seller could be dangerous and may affect your future resale value of the property. Buying a house without building regulations certificate simply passes on the issue to the new owner. When works have been completed without building control sign off the buyer has two choices:
- Obtain Lack of Building Regulations Indemnity Policy (the article below covers the costs for this insurance and what it covers)
- The seller obtains retrospective sign off for the works often called a letter of regularisation for unauthorised works
How to get Building Regulations Indemnity Insurance
Your acting solicitor would normally arrange the indemnity insurance for you.
What losses does the indemnity insurance policy cover?
In the unlikely event that you need to claim upon the insurance, the policy covers:
- damages, compensation, costs and/or expenses (but not fines or other penalties) which you have to pay because of an Order;
- the amount by which the value of the Property is reduced by the effect of an Order;
- any other costs and expenses you incur with the Insurer’s written consent because of an Insured Risk.
The definition of Order is: A decision made by a court (or another recognised body with authority to make a decision that is legally binding on you) in relation to an Adverse Matter.
What isn't covered within the indemnity insurance?
- Future losses when you sell because your buyers aren't prepared to accept building works without retrospective sign off. This can mean you have to sell the property lower than the current market value because your new buyers aren't prepared to take the risk
- Personal injury from being injured due to faulty works. For example, the electrics aren't installed to correct standards and either give you an electric shock or the circuit gets over loaded and causes a fire.
How to get a Building Regulations Indemnity Insurance Quote
To get a quote for Building Regulation Indemnity Insurance you'll need to provide to a prospective insurer the names of the legal owners, the property address, the name of your mortgage lender and the value of the property.
Want to obtain indemnity insurance? Then don't tell the council about the unauthorised works
In order for you to take out Building Regulations Indemnity Insurance the council cannot be informed that there are unauthorised works at the property. If the council are made aware then you won't be able to take out indemnity insurance and will be forced to take the longer route of getting the works signed off with a letter of regularisation.
Cost of indemnity insurance for building regulations
The cost of the indemnity insurance depends on the property's value, however for a property costing £500,000 the insurance premium may cost from around £180. Considering the general cost of rectifying unauthorised works, this may seem small, yet buyers are well within their rights to ask for the seller to pick up the cost of this policy.
Although Lack of Building Regulation Indemnity Insurance covers you for losses to remove the illegal building works, the questions is: 'is it worth ignoring the other risks involved?'
Can a seller market a property with unauthorised bedrooms?
If an additional bedroom has been added but hasn't had building building control sign off, then it cannot be marketed as having the additional room. You can only market a property with having 3 bedrooms if all 3 bedrooms have planning permission and building control sign off.
You should speak to the selling estate agent and inform them if they are incorrectly selling a property with more bedrooms than it legally has.
Can I sell my house without building regulations?
Yes you can sell your property without building regulations for works if the buyer doesn't have a mortgage. If your buyer does have a mortgage then they must obtain indemnity insurance if the seller has unauthorised building works as part of the buyer's obligations towards the mortgage lender.
Can you get retrospective building regulations sign-off?
Yes you can, although you should be prepared as the works may not actually be legal and could require the seller to take them down. It may also take many weeks to finally obtain retrospective building control sign off. You can read more on this here - How to get retrospective building regulations
NB You cannot get a Letter of Regularisation for unauthorised building works completed before 11 November 1985
The Building Act 1984 (which came into force 11 November 1985) set out certain standards for various building works which were standardised more recently into the Building Regulations in 2010 (and since amended). As a rule, Building Control authorities cannot grant letters of regularisation for works finalised before 11 November 1985.
Any relevant building works finalised before this date has to remain classed as "unapproved" and can only become approved if you go through the building control process right from the beginning - and the local building authority are likely to inspect intrusively and may even require you to knock down and rebuild from scratch.
If you are unsure what to do or have bought a property that didn't have building control sign off and want to know what to do then give us a call on 0333 344 3234 or email help@samconveyancing.co.uk.
How to get a Building Regulations Indemnity Insurance Quote
To get a quote for Building Regulation Indemnity Insurance you'll need to provide to your insurer the names of the legal owners, the property address, the name of your mortgage lender and the value of the property.
Your acting solicitor would normally arrange the indemnity insurance for you.
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