By Alex Lewsley, Senior Associate. Contact Thomson Snell and Passmore 01892 510000.
Indemnity insurance is obtained to insure against potential financial loss if an identified risk occurs. It is important to comply with all conditions of the policy.
During a transaction lawyers acting for buyers and/or lenders may discover legal issues which can be addressed by obtaining such a policy. Common examples include the apparent absence of a legal right of way across third party land whose ownership is unknown, a change of use or alterations without the necessary planning consents and possible restrictive covenants which could prevent the intended use of a property.
Your lawyer will advise whether indemnity insurance is a solution to the issue and will ascertain if an existing indemnity policy is in place.
Any existing or new policy will require that there has not been nor will be any approach to the third party whose land is affected or the relevant authority alerting them to the issue.
You may unwittingly make such insurance unavailable or invalidate your existing insurance by:
- contacting neighbouring landowners and requesting, for example, a formal right of way across their land or a formal release from a restrictive covenant. That person perhaps was unaware of the issue and then either refuses or demands a payment;
- applying to a planning authority for retrospective consent to a change of use or alterations.
Always check any proposed course of action with your lawyer.