A Guide to Limited or No Title Guarantee Legal Indemnity Insurance
A Guide to Limited or No Title Guarantee Legal Indemnity Insurance
Limited or No Title Guarantee Legal Indemnity Insurance policies offer protection where a buyer is purchasing a property and the vendor is selling with either Limited or No Title Guarantee. The policy covers unknown charges, encumbrances or third party rights.
In this guide we look at the Limited or No Title Guarantee Legal Indemnity Insurance CLS can provide and answer questions on:
- Who needs Limited or No Title Guarantee Legal Indemnity Insurance?
- Selling a property with or without guarantees
- Buying a property with a Limited Guarantee or No Guarantee
- What does Limited or No Title Guarantee Legal Indemnity Insurance cover?
- Taking out Limited or No Title Guarantee Legal Indemnity Insurance
Who needs Limited or No Title Guarantee Legal Indemnity Insurance?
Limited or No Title Guarantee CLS Legal Indemnity Insurance provides wide ranging cover as it protects:
- The purchasers of the insured property
- Their lenders
- Future purchasers
- Future mortgage lenders
Anyone buying or lending on a property that is offered for sale with Limited or No Title Guarantee should consider taking out a policy. The policy protects from start date in perpetuity, giving peace of mind when purchasing and if the property has to be placed on the market in future.
Selling a property with or without guarantees
A conveyancing solicitor will check to see if a vendor is contracting to sell a property with:
- Full Title Guarantee
- Limited Guarantee
- No Title Guarantee
As conveyancers are aware of the provisions in the Law of Property (Miscellaneous Provisions) Act 1994 and understand the significance of the precise guarantee wording in a property contract.
If a property is sold with ‘Full Title Guarantee’ the buyer gets the benefit of implied covenants under the 1994 Act. These include implied terms that the seller:
- Has the right to sell the property
- Will do all that they reasonably can do to ensure the buyer obtains a good title to the property
- Is disposing of all the land in a registered title
- If the property is unregistered title, that the land is freehold title
- If the property is leasehold, that the lease is still in existence and the vendor has complied with the terms of the lease
- Is selling the property free of mortgages and third party rights unless the seller could not reasonably have been expected to know about the third party rights
Buying a property with a Limited Guarantee or No Guarantee
When a vendor sells with Limited or No Title Guarantee then the purchaser accepts some risk as the seller cannot guarantee that the property is not subject to overriding interests, covenants or adverse rights or charges that they are unaware of. Those risks can sometimes be reduced to an acceptable level through taking out Legal Indemnity Insurance.
Limited or No Title Guarantee is often offered when a property is being sold by a third party, such as:
- The administrator or executor of an estate
- A trustee
- By an attorney under a Lasting Power of Attorney
- After a repossession
- By a trustee in bankruptcy
What does Limited or No Title Guarantee Legal Indemnity Insurance cover?
Limited or No Title Guarantee Legal Indemnity Insurance policy pays out if :
- A third party successfully asserts that they can exercise adverse rights over the insured property by way of a charge or encumbrance or right and
- The insured has no right of recovery against the immediate predecessor in title because the property was bought with Limited or No Title Guarantee as defined in the 1994 Act
The policy covers the diminution in market value of the property if a third party claim is made after the policy was 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 but as property values change over time the policy limit rises to match increases in the value of the property, up to a maximum of 200% of the initial insured sum.
The policy does not cover loss:
- Arising from interference with or damage to any rights or easements over or beneath the surface of the property in use at the policy start date
- From the exercise or attempted exercise of mining and mineral rights or over or under the property
- Directly or indirectly arising out of or contributed to by subsidence, ground heave or landslip caused by any mining or mineral extraction activity prior the policy date
Taking out Limited or No Title Guarantee Legal Indemnity Insurance
The CLS Limited or No Title Guarantee Legal Indemnity Insurance policy cover is flexible and available where the Statements of Fact are broadly:
- The insured property is a single house or flat in England or Wales.
- Any building on the property has existed unaltered for at least 12 months immediately prior to the policy date
- The property is registered with the Land Registry as Absolute Title
- The seller and buyer are not aware of any third party attempting to exercise any rights or easements over the property and have not communicated with third parties regarding rights or easements over the property
- The buyer confirms the property is fully enclosed by well-established and clearly defined physical boundaries
- The current title to the property is not subject to any notices or restrictions or charges
- The buyer has submitted an official search with priority and intends to complete the property purchase within the search priority period
- The insured has prior fully complied with the requirements of the UK Finance Mortgage Lender’s Handbook for England and Wales, including remedying or insuring any identified title defects
- Neither the seller nor the buyer is aware of any matter which is likely to give rise to a claim, other than any matter already disclosed
Online Legal Indemnity Insurance policy cover is available in minutes. If additional help is needed on the Statement of Facts or coverage, CLS can advise on suitable Legal Indemnity Insurance policies.
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.