A Guide to Enlargement of Lease Legal Indemnity Insurance
Enlargement of Lease Legal Indemnity Insurance covers the situation where a seller cannot prove their conversion from leasehold status to freehold is valid and therefore not without risk from potential future adverse third party claims.
In this guide we look at the CLS Enlargement of Lease Legal Indemnity Insurance and answer questions on:
- Who needs Enlargement of Lease Legal Indemnity Insurance?
- Who does Enlargement of Lease Legal Indemnity Insurance protect?
- What does Enlargement of Lease Legal Indemnity Insurance cover?
- Taking out Enlargement of Lease Legal Indemnity Insurance
Who needs Enlargement of Lease Legal Indemnity Insurance?
A buyer may need Enlargement of Lease Legal Indemnity Insurance if they are purchasing a property where, through a deed of enlargement, the property may be subject to:
- Unknown estates, rights and interests vested in any third parties to the extent that the lease enlargement was ineffective
- Any matters specified in Section 153(8) of the Law of Property Act 1925
Who does Enlargement of Lease Legal Indemnity Insurance protect?
An Enlargement of Lease policy protects the buyer and lender. If the property is sold the policy will also protect the purchaser if they comply with the policy conditions. Cover starts on the date of the policy and is not time limited.
What does Enlargement of Lease Legal Indemnity Insurance cover?
The Enlargement of Lease Legal Indemnity Insurance policy pays out if a third party successfully asserts that the historical enlargement of the lease, to make the leasehold property into a freehold one, is invalid and that enables the third party to exercise adverse rights over the insured property.
The policy covers the diminution in market value of the property if lease enlargement claims are made after the policy is taken out and a loss is realised. The policy also covers sums paid and associated costs to release the property from adverse third party rights if it is possible for the insurer to negotiate with the third party over their adverse rights.
The policy limit is based on the market value of the property. However, as the property value is likely to change over time the policy limit increases to match rises in the value of the property, up to a maximum of 200% of the initial insured sum.
The policy does not cover loss:
- From the interference with or damage to any rights or easements over or beneath the surface of the property and in use at the start of the policy
- From the exercise of mining and mineral rights over or under the property
- Arising from or contributed to by subsidence, ground heave or landslip caused by any mining or mineral extraction activity prior to the policy start date
- From the extraction of gas, oil or geothermal energy at the property
Taking out Enlargement of Lease Legal Indemnity Insurance
When taking out Enlargement of Lease Legal Indemnity Insurance there are two points to note:
- The policy does not cover all potential adverse third party rights – only those arising from an invalid lease enlargement
- Specialist policies to cover potential additional adverse third party rights are available, such as manorial rights or mineral rights or absence of easement policies
Taking out an Enlargement of Lease Legal Indemnity Insurance policy is straight forward as CLS can arrange cover in minutes. If additional help is needed on the Statement of Facts or coverage.
CLS here to help
CLS has over 15 years of experience in helping conveyancers with both residential and commercial property transactions. Our online portal is free to register and you’ll find our range of over 60 Legal Indemnity Insurance policies and products at your fingertips - including Variable Statements of Fact to let you customise to your client’s needs for the full range of legal indemnity policies including search legal indemnity insurance policies. Online indemnity insurance protection can be available within a matter of minutes. If a bespoke quote is required or you would simply rather speak to someone about policy options, we also have a team of specialists who can help you out with a bespoke offline policy.