Who pays for an indemnity policy?

"You either: Get the seller to have the works signed off so you know they are safe and do meet building control standards; or Obtain indemnity insurance to protect your lender if the value of the property goes down, if the council require the works to be removed/rectified. The cost depends on the property value, ranging between £100 and £1,000. You can ask the seller to pay for the indemnity insurance." It is generally the seller who pays the premium for the indemnity insurance. Your acting solicitor would normally arrange getting this for you. Speak to your solicitor and ask them to source you an indemnity quote and find out if this will work out cheaper for you. 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.

Is indemnity insurance the same as building regulations?

No, they are two different things. Building regulations are the standards for construction set by the Government, which apply to the majority of building projects. The regulations are there to ensure that buildings are safe, energy efficient and have reasonable access for all. If you're trying to buy a house and the seller has conducted unauthorised building works on it, you can then get indemnity insurance to protect you and your mortgage lender from any risks.

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.

SAM Conveyancing explains if you should get building regulations indemnity insurance

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Should you get building regulations indemnity insurance?

by:

Andrew Boast

Created on:

14/12/2018

(Last Updated: 08/12/2023)

Read by:

92,935

7 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.

Common types of work that require building control sign off are:

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, often called a letter of regularisation for unauthorised works

Lack of Building Regulations Certification Indemnity Insurance Example

"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?
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.	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.
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 losses does the indemnity insurance policy cover?

What isn't covered within the indemnity insurance?

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.

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.

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 letter of regularisation.

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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 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

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.

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Written by: Andrew Boast

Laura has a talent for data analysis and fact-finding. She is an advertising graduate with a broad range of skills in the web marketing field within conveyancing sector. She works closely with our panel of solicitors and surveyors to understand our clients' needs and challenges and to write the most valuable content for you.

Reviewed by: Andrew Boast

Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.

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