News & Insights // Indemnity Insurance: Protect Yourself Against Unforseen Property Risks

Chancel search: Could you be made to pay for repairs at your local church?


The case of a Warwickshire couple forced to sell their farm following a £230,000 bill to fund repairs to a nearby church may have set alarm bells ringing for homebuyers across the country. But there is a way to avoid being hit by the kind of obscure and ancient law that left the Wallbanks liable for part of the upkeep of the 13th-century church in Aston Cantlow: indemnity insurance.

In reality, chancel repair liability, which makes owners of certain properties liable for the upkeep of a church's chancel, poses a minute risk to most homeowners. In the handful of cases where it does apply it could be that the liability lies with thousands of households, so the risk of having to pay a lot of money would be very small.
Nevertheless, says David Fleming, head of litigation at William Heath & co solicitors, it makes sense to rule out the risk of chancel repair liability when you are considering buying a house. "It would be perfectly possible to buy a property without knowing that this law affects it," he explains. "The prudent solicitor will do it as a standard search."
This costs £20 plus VAT. If it does come back showing there is a potential liability it is possible to cover against the sorts of costs the Wallbanks are now facing, and your lender will expect you to do so. The Council of Mortgage Lenders (CML) stipulates that buyers should insure against such risks.

Indemnity insurance pays out if the event you are covering yourself against should happen. It can be used to protect against a number of issues you – or more likely your solicitor – may uncover.

Some of the most popular policies of this kind cover problems arising from:
¦ Restrictive covenant Documents on a house may, for example, state that the owner should not build an extension. If you find the previous owners have done just that you can use indemnity insurance to cover legal costs you might incur, as well as any alterations required by a court order.
¦ Lack of planning permission and/or building regulations If the property you plan to buy was extended or altered more than a year previously, it is fairly easy to insure against a lack of planning permission or the absence of building regulations.
¦ Local authority search This is usually only used for remortgages, where the local authority searches required by lenders may be out of date, but the homeowner is pretty sure nothing has changed so applies for a remortgage without renewing them.
¦ Insolvency Act This usually comes into play when a parent gifts a property to their child. If the parent becomes insolvent within seven years of the gift, the house will be considered part of the parent's property. This policy covers against that risk.
¦ Absence of easement This sort of policy covers access rights. If, for example, your drains can only be reached from your neighbours' garden, such cover essentially protects you against legal costs if the neighbour attempts to prevent you from having access.

In reality, the risks involved in all of these cases are very small – otherwise you would not be able to buy insurance against them. Nonetheless, if the CML lenders' handbook requires it, and you need a mortgage, you will have to take out insurance.

"The cost should be taken on by the seller," Richard Atkins, property partner at Taylor Walton solicitors,says. "But if they refuse, the buyer has no choice but to pay for the premium as the lender will only lend on that basis."
Premiums are not excessively expensive and are calculated on the value of the property, not on the level of risk. Indemnity insurance for a lack of planning permission and building regulations is likely to cost between £200 and £500, while insurance against chancel repairs liability costs between £50 and £200.

Even though the risk you are insuring against is tiny, if there is any doubt your solicitor is likely to advise you to get a policy