Conveyancing Explained – Pros and Cons of Building Regulation Indemnity Insurance

Conveyancing Solicitors acting for homebuyers have to be alert for situations where work has been carried out which might have required building regulation approval. Although Conveyancing Solicitors are not expected to be expert on the details of the regulations, they owe a professional duty to buyers to ensure that necessary approvals have been obtained.

Legislation stipulates that any work which involves the construction or alteration of buildings is subject to building regulations. In the case of a newly-built house that will be obvious, but often seller or previous owner will have carried out work which may not be immediately apparent.

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Works which require approval

Any work of a structural nature such as the removal of a chimney breast, the removal of a load bearing wall, repairs to or replacement of a roof, extensions, some conservatories etc. , would require evidence of building regulations approval.

In recent years the scope of building regulations has been considerably extended, so that works such as replacement windows, gas and electrical installations and replacement hot water tanks must now comply with relevant regulations. Evidence of approval will be required for such works, but this can often take the form of a commissioning certificate from a qualified contractor, or a 'FENSA' certificate for windows and doors.

It may be apparent when you view a property that works have been carried out, but if not your surveyor should be able to point these out to you in his report. However not all such works may be readily apparent, but sellers should disclose everything they are aware of.

Solutions when Conveyancing Solicitors discover that works are not approved

  • Getting retrospective consent
    • Where works have been carried out which have not been approved it may be possible to obtain building regulation approval retrospectively.   However this will delay things; the building inspector can only apply the current regulations, so perfectly acceptable work which was carried out some years previously may not now comply. Also the inspector might require plaster or tiles to be removed to inspect structural work underneath.
  • Indemnity insurance.
    • This is a popular alternative way of resolving this issue. These policies are issued  by several specialist insurers, and cover both the purchaser and any mortgage lender against any financial losses should enforcement action be taken against them (or future owners of the property).   The premium is a one off payment - usually paid for by the seller - and is for the market value of the property.
  • Conditions which have to be met in order for an Indemnity Insurance policy to be acceptable:
    • The work has to have been completed at least 12 months prior to the indemnity Insurance policy being taken out
    • No formal application must have been made to the local authority, and neither of the parties are aware that the local authority have been informed of the works
    • The property is used as a residential dwelling and will continue to be used as such
    • No notice, whether formal or informal of impending enforcement action has been issued
    • A Survey or Valuation Report has to have been carried out which must not make any adverse comments concerning the works that are to be insured
  • Advantages of  indemnity insurance over retrospective approval
    • it is much quicker (it can often be arranged by Conveyancing Solicitors online in minutes)
    • cheaper – premiums are usually very modest
    • it avoids alerting the local authority to the breach of building regulations which could lead to them serving a statutory notice when they might otherwise never have known about the work.

If indemnity insurance is obtained the buyers must not alert the local authority to the existence of the breach of building regulations in future. They must not change the use of the property, nor reveal the existence of the policy to anyone other than a future purchaser or the Conveyancing Solicitor acting for them in a sale or remortgage, otherwise the indemnity policy would be invalidated.

Disadvantages of indemnity policies

Indemnity policies will only cover losses and expenses arising out of enforcement action, not any loss arising because of a defect in the work. The whole purpose of building regulations is to try and ensure that work is carried out to acceptable standards. If approval has not been obtained then there is always the risk that sub-standard work might collapse or cause other damage to the building or to its occupants.

'Buyer beware' – the need for a proper building survey

Buyers should always ensure that they have had a proper survey carried out. The 'survey' carried out as part of the mortgage application is no more than a valuation survey, and will not involve any detailed inspection.

Fridaysmove recommend that a full building survey should be carried out on all homes over ten years old, and can arrange these at reasonable cost. Buyers frequently find that they can negotiate a reduction in the price if the survey reveals minor defects, which outweighs the cost of having the survey done.

If you are buying a house get a quote now for Conveyancing Solicitors who will provide fast cheap Conveyancing for you and ensure you have full advice on any issues connected with building regulations. Alternatively phone 0800 038 6446.

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