Selling a house can be stressful enough without legal hiccups throwing a spanner in the works. But what happens when a buyer’s solicitor spots something unexpected – like a missing building regulation certificate, unclear boundaries, or an old planning issue?
These kinds of red flags can derail a sale, delay your timeline, or even cause buyers to walk away. That’s where indemnity insurance comes in.
This clever legal workaround has saved countless UK house sales by covering the risks buyers worry about – without you needing to jump through hoops or fix ancient paperwork problems.
In this guide, we’ll break down exactly what indemnity insurance is, when it’s needed, how much it costs, and how you can use it to keep your property sale moving smoothly.
What is Indemnity Insurance When Selling a Property?
When you’re selling your house, the last thing you want is a solicitor flagging some ancient planning issue or a dodgy title deed.
That’s where indemnity insurance comes in.
The Basic Definition
Indemnity insurance is a one-off legal protection policy. It covers buyers (and sometimes lenders) against future losses arising from certain legal defects in a property’s history or paperwork.
Think of it as a workaround.
Instead of correcting an issue – which might involve chasing lost paperwork, paying for surveys, or begging councils for retrospective sign-off – indemnity insurance says:
“Let’s just insure against the risk and get on with the sale.”
Who Is It For?
Although it protects the buyer, it’s often the seller who pays for it.
Why?
Because sellers are usually the ones who need to keep the sale on track.
A buyer’s solicitor might say, “We’re not comfortable proceeding unless this is sorted.” And rather than lose your buyer, you stump up £50–£200 for a policy that keeps things moving.
It’s a bit like paying for someone else’s peace of mind – but it’s often worth it to avoid weeks of delays or a deal falling through.
When Is It Used in a Sale?
Indemnity insurance crops up when conveyancers or surveyors spot an issue during the legal checks that’s either:
- too expensive to fix,
- would take too long to resolve,
- or isn’t realistically fixable at all (e.g. a planning breach from 30 years ago and no surviving paperwork).
Rather than grinding everything to a halt, a policy is taken out to protect against future consequences.
Simple. Fast. Legal.
Common Situations Where Indemnity Insurance Is Used
You’d be surprised how many property sales hit a snag because of old paperwork, or lack of it.
Here are the most common legal gremlins that indemnity insurance helps smooth over:
Missing Building Regulation Approval
Let’s say your seller added a loft conversion in the 90s – but can’t find any paperwork showing it met building regs.
Instead of risking delays trying to track down approval or get retrospective sign-off (which councils aren’t always keen on granting), indemnity insurance covers the risk that someone might enforce it in future.
Absence of Planning Permission
A conservatory, extension, or garage conversion built without permission – especially if it’s old and no complaints have ever been made – often qualifies for cover.
You can’t apply for retrospective planning once it’s been more than four years (or ten in some cases), so a policy can be the only way forward. If you do apply for retrospective planning permission, you then can’t get insured because once the council is alerted to an issue it becomes more likely that there will be some kind of consequence.
Breach or Uncertainty Around Restrictive Covenants
Many older properties have covenants buried in the title – like banning alterations, running a business from home, or even keeping chickens.
Often, it’s unclear whether the covenant’s even enforceable. Indemnity insurance protects against someone crawling out of the woodwork and kicking up a fuss.
Lack of Evidence of Rights of Way or Access
Shared driveways or access paths can be a minefield – especially when it’s not documented properly.
If you’ve always used a route but there’s no formal right-of-way on the title, a policy can cover the risk of a future neighbour disputing it.
Lack of a Party Wall Agreement
If building work was done that should’ve triggered a Party Wall Agreement (but didn’t), indemnity insurance can cover the risk of neighbours raising an issue later.
Missing Title Deeds or Unclear Boundaries
Some older properties are missing documents altogether – or the boundaries on record don’t quite match what’s physically there.
Insurance can bridge that gap without needing the Land Registry to intervene.
Insolvency Act Risks
If a property was transferred for below market value within five years of the owner going bankrupt or insolvent, it can sometimes be challenged. This policy covers the new buyer in case of future claims.
Environmental Searches
Sometimes searches come back flagging things like flood risk, or contaminated land. These can spook buyers. Often there’s no clear reason why the searches flag these issues i.e. there might be a river nearby that’s never flooded but it causes the property to be classed as a flood risk. Or, you might have a petrol station nearby which has caused the property to be labelled as contaminated land.
The report won’t tell you exactly why the classification has been applied.
The risk with contaminated landis that the council could force the properties on the contaminated land to pay for remedial work regardless of whose fault it is. In such case, the indemnity insurance would pay for the clean-up, if it was to be enforced.
What Does Indemnity Insurance Actually Cover?
Let’s be clear – indemnity insurance isn’t some vague “peace of mind” product. It’s laser-focused on very specific risks.
Here’s what it typically includes:
- Legal defence costs: If someone challenges your right to use the property (e.g. disputes an access path or enforces a covenant), the policy pays for legal representation.
- Loss in property value: If a claim leads to a forced change, like having to take down an extension or move a boundary, the policy may cover the financial hit.
- Costs to resolve the issue: That could include alteration work, reinstating access, or making legal changes to the property.
Important: It only covers the named defect. That means if the policy is for missing building regs approval, it won’t cover some unrelated issue that pops up later.
And yes – the cover sticks with the property. So when your buyer sells the place in future, the indemnity policy usually rolls over to the next owner. Handy.
What Doesn’t Indemnity Insurance Cover?
Right, here’s where people often get caught out.
It doesn’t fix the problem.
This isn’t some magic wand that makes the defect disappear.
The breach or gap in the paperwork is still there – you’re just legally protected if it causes problems. That’s why many people describe indemnity insurance as a “legal band aid”.
It usually excludes:
- Any known enforcement action: If you’ve already contacted the council or another authority about the issue, or they’ve sent a letter or enforcement notice – the policy is void.
- Future developments: If you apply for planning permission or do more work that draws attention to the original defect, that can invalidate the cover.
- Anything you tell third parties: For example, if you write to a neighbour about a covenant and admit it’s being breached – that may disqualify you from claiming.
Basically if you need to claim on the policy, but its because you’ve rocked the boat and caused people to take action, then you won’t be covered.
Do You Need Indemnity Insurance to Sell?
So – do you actually need this stuff, or is it just a legal box-ticking exercise?
Well, that depends on your buyer, your timeline, and how much of a hassle you’re willing to take on.
When You Might Not Need It
There are a few scenarios where indemnity insurance is nice to have, but not essential:
- Cash buyer who’s happy to take the risk
- You’ve got time and are willing to fix the issue properly (e.g. apply for retrospective building control)
- The defect is minor, or unlikely to cause a problem later
In these cases, a sensible buyer might shrug and move forward without a policy.
But…
When It’s Strongly Advised
There are situations where you’ll almost certainly need indemnity insurance to stop the sale falling apart:
- Buyer’s solicitor insists on it – and they usually do
- Mortgage lender requires it – no insurance, no loan
- You’re in a chain, and time is tight
Basically, if anyone involved in the sale process raises a red flag, getting the policy is often the fastest, cheapest fix.
Can You Refuse to Pay?
Technically, yes.
Indemnity insurance isn’t a legal requirement – it’s just a way of de-risking the sale. But if you refuse to pay and the buyer or their lender walks away?
You’ve just lost your buyer over a £150 policy.
Many sellers decide to just pay for it to keep the sale moving. Some negotiate and split the cost with the buyer. Either way, it’s usually a drop in the ocean compared to the value of the sale.
Tip: Get it in writing early if the buyer’s expecting you to cover the policy – and shop around. Not all insurers charge the same.
How Much Does Indemnity Insurance Cost?
Here’s the good news: indemnity insurance won’t break the bank.
In fact, most policies are surprisingly cheap, especially when you consider they can save your entire sale.
Typical Price Range
- Simple issues (e.g. missing FENSA certificate, lack of building regs):
Expect to pay between £20 and £100. - More complex matters (e.g. unknown ownership boundaries, rights of way):
These can go up to £300 or more – especially if multiple defects are covered in one policy.
What Affects the Cost?
- Property value: The more the property’s worth, the higher the potential payout – so the premium increases.
- Type of defect: Riskier or harder-to-enforce issues cost more to cover.
- Who’s insured: Some policies include cover for the buyer, lender and future owners.
- Insurer: Like any product, different insurers offer different rates and limits – your solicitor will usually find the best fit.
One-Off Payment, Lifetime Cover
Here’s the best bit:
You only pay once. No monthly fees, no renewals.
And the policy lasts forever – even if the buyer sells the property on. As long as the original defect isn’t worsened or acknowledged officially, the cover stays in place.
Not bad for £100, right?
How to Get Indemnity Insurance
You don’t need to trawl comparison sites or get on the phone with insurance brokers.
In fact, you can’t usually buy indemnity insurance directly as a homeowner.
Here’s how it works:
Your conveyancer or solicitor will:
- Identify the issue
- Confirm indemnity insurance is appropriate
- Recommend a suitable policy
- Liaise with the insurer
- Set it up as part of the sale process
Easy. Most solicitors have a handful of trusted providers they work with – like CLS or GCS – and will sort the paperwork in-house.
Eligibility Rules: Silence Is Golden
This bit’s crucial: indemnity insurance can only be issued if you haven’t already contacted the authority that enforces the issue.
So:
- Don’t ask the council if they have records of planning permission
- Don’t contact your neighbour about a right of way
- Don’t apply for retrospective approval unless your solicitor advises it
- Don’t ask the council if they believe land is contaminated
Once you’ve raised the issue, insurers usually won’t cover it – because enforcement is now more likely.
Tip: Always speak to your solicitor first before trying to “do the right thing” and sort things yourself. You could accidentally make insurance impossible.
Should You Disclose the Defect?
Here’s where it gets awkward.
Because while honesty is usually the best policy – when it comes to indemnity insurance, too much disclosure can actually invalidate the policy.
Let me explain.
What the Law Says
As a seller, you’re legally required to complete the TA6 Property Information Form honestly.
This form asks about things like:
- Building works
- Planning permission
- Disputes with neighbours
- Legal rights and restrictions
If you know about a defect – like a missing certificate, or that the loft was converted without sign-off – you can’t lie or leave it blank. That could leave you open to claims for misrepresentation later on.
But…
Don’t Volunteer Extra Detail
If the issue isn’t specifically asked about, or if it falls into a grey area (like uncertainty over a covenant), don’t go digging unnecessarily.
Why?
Because some indemnity policies rely on the defect not being formally disclosed or acknowledged.
For example, if you write “The back extension has no planning or building control” in a covering email, some insurers won’t touch it – because you’ve admitted knowledge.
Instead, let your solicitor advise you on:
- What needs to be disclosed
- How to word things
- Whether indemnity cover is possible
It’s a legal tightrope – and they’ll know how to walk it.
Legal vs. Moral Dilemma
Buyers understandably want transparency.
But the reality is: indemnity insurance only works when the issue stays theoretical. The moment it becomes a known, documented problem – it can no longer be insured.
Rule of thumb: Never contact the council or anyone official about a defect unless your solicitor tells you to. You could kill your own insurance chances.
Alternatives to Indemnity Insurance
Indemnity cover is quick, cheap and effective – but it’s not always the right solution.
Sometimes, fixing the issue properly is the better long-term move. Other times, the insurance simply isn’t available (say, if you’ve already contacted the council).
Here’s what you can do instead:
Retrospective Planning Permission or Building Control Sign-Off
If you’ve carried out works without the proper paperwork, it might be possible to apply retrospectively.
But there are downsides:
- It takes time – weeks or months
- It flags the issue officially – which means insurance won’t be an option anymore
- There’s no guarantee it’ll be granted
Still, if you’ve got time to spare and the work was done to a good standard, it might be worth going down this route.
Title Rectification via Land Registry
If the title plan is wrong, unclear, or missing information (like a right of access or accurate boundary), your solicitor can apply to correct it.
It’s not quick – and you may need to provide evidence like old deeds or historical use – but it’s a permanent fix.
Deed of Variation or Surrender
Got a restrictive covenant that’s outdated or causing issues?
You may be able to negotiate with the original beneficiary (like a previous landowner, developer or neighbour) to have it:
- Varied (amended)
- Surrendered (removed entirely)
This gives future owners more certainty – but it can be complex and may require compensation or legal costs.
Sale at Discount Without Cover
Sometimes, if the buyer is confident the issue won’t matter – and their lender agrees – you can agree a small price reduction instead of sorting the defect or insuring against it.
This is more common in cash sales, where the buyer takes full responsibility for the risk.
Tip: If you’re going this route, make sure everything is recorded in writing, and your solicitor draws up a clear indemnity disclaimer.
How to Sell Fast with No Indemnity Insurance
At Property Rescue, we buy homes directly for cash with or without indemnity insurance. We’ve seen every kind of legal defect you can imagine:
- No building regs
- Missing deeds
- Title glitches
- Boundary disputes
- Problem tenants
We don’t panic. We don’t walk away. We still buy the property directly from the seller.
Even if your buyer pulled out because of a legal issue, we can step in as a new buyer, offer a guaranteed sale, and get it over the line – often within just days.
No stress. No estate agents. No endless back-and-forth.
Most buyers get spooked by legal defects. But we don’t.
Get a free, no-obligation cash offer today.
Let’s take the stress out of your sale – and get you moving forward.
