What Is A Title Indemnity Policy?

A title indemnity policy is a special type of insurance policy, taken out against any loss arising from a defect in a lease. Once in place, it should cover both mortgagees and "successors in title" which means that when the property is sold, a new policy will not be required. Generally the policy lasts for 25 years.

If a property has a defect, the buyer can make it a condition of sale that the vendor pay for this policy.

Why Would You Need An Indemnity Policy?

The Council for Mortgage Lenders (CML) set down guidelines for leases in the 1990's. Most leases created since the 1990's conform to those guidelines and therefore will be acceptable to mortgage lenders. However, those drawn up before the 1990's frequently do not and therefore are regarded as defective.

Taking out an Indemnity Policy will make most defective leases acceptable to the mortgage lender. If you are a cash buyer, you are not dependant on the mortgage company, but it may be advisable to take out a policy to insure against problems in selling the property or any expenses or difficulties that may arise because of the defect.

What Are Considered Defects In A Lease?

For the self builder / developer, the commonest defects in a lease include:

• Restrictive covenants
• Defective title (including good (absolute) leasehold title, lost title deeds, adverse possession, outstanding rights and easements)
• Lack of planning permission and/or lack of building regulation consent
• No right of access or right for services - if the rights of way are missing then an indemnity policy will be required

Other defects in a lease can include:

• Chancel repair liability
• Absentee landlord and maisonette indemnity
• Flying and/or creeping freehold
• Insolvency act