Defective title indemnity insurance in conveyancing – a necessary evil ?

This article deals with indemnity insurances that may be required to deal with defects in title, restrictive covenants and similar matters in the conveyancing process.

Defective title indemnity insurance is often employed as a solution by conveyancing solicitors where cover is needed because in examining the title he or she has discovered a problem which cannot be cured in a conventional way i.e. rectification of the deeds or title.

Defective titles are quite common in conveyancing, particularly bearing in
mind the extremely onerous requirements of banks and other lenders in relation to properties on which they advance money. If defects are present in the Title, banks will often require indemnity insurance.

Examples of common defects are:

  1. A lack of a right of way to access a property
  2. A lack of proper rights to run drains or other pipes, wires or cables over a neighbouring property
  3. A missing document of Title – for example a document which contains easements which the property needs but which cannot be found

It should be noted that defective title insurance does not remedy the insured defect, but merely offers financial compensation. You should also check each indemnity insurance policy individually to see what actions might invalidate the cover. For all indemnity insurance policies however, it is a condition that their existence must not be revealed to third parties.