Should you get building regulations indemnity insurance?
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 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. Your conveyancing solicitor will organise your quote from the indemnity insurance provider.
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
- Garage Conversions
We discuss this in further detail in our article - Building Regulations.
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. If the seller makes it seem like the work was compliant, you can sue for 'misrepresentation'.
When works have been completed without building control sign off the buyer has two choices:
- Obtain Lack of Building Regulations Indemnity Policy
- The seller obtains retrospective sign-off for the works, with a regularisation certificate for unauthorised works
"The problem with indemnity insurance is that it sweeps the issue under the carpet and doesn’t fix it. Yes, it gets you to completion and into the property, but you’re left with the problem to fix.
You take on both the cost and the risk. What if the boiler wasn’t installed properly and there is a gas leak which starts a fire? What if removing the load-bearing wall has made the property structurally unsafe and part of the building collapses? What if the previous landowner forces you to take down your extension? These are the risks and costs you’re taking on by ignoring the issue and just obtaining indemnity insurance. It doesn’t pay for you to fix the issue, it just protects the mortgage lender."
What losses does the indemnity insurance policy cover? | What isn't covered within the indemnity insurance? |
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What losses does the indemnity insurance policy cover?In the unlikely event that you need to claim upon the insurance, the policy covers:
| What isn't covered within the indemnity insurance?
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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. | |
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 certificate of regularisation.
However, regularisation is the safer option, if you can wait for it. We offer an qualifying assessment from one of our local structural engineers, who will inspect the works without telling the council about their findings. This way, you can choose to opt for regularisation or insurance, depending on their findings, and you'll have a professional assessment to base your negotiations on.
Our structural engineer will attend the property to inspect the unauthorised works for compliance with Building Regulations - Part A: Structure. This is an intrusive survey. The report will:
- confirm that the works appear compliant and simply need to be signed off by building control;
- outline any works required to make the work structurally compliant before bringing a building control inspector in to grant the letter of regularisation; or
- confirm that the work would need to be completely undone or redone to meet building regulations.
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 you get retrospective building regulations sign-off?
Yes you can, although you should be prepared as the works may not actually be legally compliant and could require the seller to undo or redo them. They may be reluctant to agree to this as once the local authority are aware of the unauthorised works, no prospective buyer will be able to get indemnity insurance.
Instead, we suggest you get a structural engineer to assess the work for compliance before deciding whether to pull out, get insurance, or apply to the council for regularisation. This means you can negotiate on a realistic assessment, and the seller will be free to find a new buyer who will accept indemnity insurance, if you decide to pull out. You can read more on this here - How to get retrospective building regulations
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 contact us using the form below.
You can also get indemnity insurance against Possessory Title, missing Local Authority Search, and Restrictive Covenants.
Caragh is an excellent writer and copy editor of books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey, property law and mortgage-related articles.
