Housebuilder Top Tip: Title Indemnity Insurance – A Quick Guide

Published 28 May 2019

Where a title defect or development constraint is spotted during property due diligence a discussion around whether title indemnity insurance will solve the problem invariably follows.

Title indemnity insurance is extremely useful. It provides a quick solution that passes the financial risk of enforcement to the insurer. However it is worthwhile remembering the following points:

• Usually the terms of the policy will prohibit contact being made with any beneficiary (or the Land Registry) without the consent of the insurer. If this is ignored the policy might be avoided.
• The policy should allow disclosure to purchasers, successors, their mortgagees and professional advisers. It is worth double checking the policy to ensure that consent is not required.
• If the development constraint has been created recently, or if there is a live dispute, or the risk of enforcement is high, an insurer will be loath to make cover available.
• Question whether the policy includes a mechanism to cover increases in the value of the property and whether it covers the full developed value of the property.
• An insurer will require a 'fair presentation of risk’. This means that every 'material circumstance' which the insured 'knows or ought to know' should be disclosed. Failure to make a fair presentation of risk may allow the insurer to avoid the policy.

Indemnity insurance will not “cure” the defect in itself but provides financial support to enable the insured to pursue a course of action in the event of a claim that may provide a solution. It is worth considering the impact that this might have on the marketability of any development and whether it is necessary to provide additional comfort to buyers.