Indemnity Insurance and the Stamp Duty Land Tax Discount
Conveyancing can be a long and complicated process, and ‘the unexpected’ is always ready to throw a spanner in the works, often at the worst possible moment. Transactions and completions are often delayed by varying factors, such as delayed search results and lack of planning or building regulations permissions and approvals.
The Stamp Duty Land Tax holiday offered by the Chancellor earlier in the year was designed to stimulate the sudden slump in the housing market caused by the pandemic lockdown period. Giving property transactions of up to £500,000 a break from the usual stamp duty fees meant that the market was rejuvenated. The only problem is that for the discounted fee rate to apply, any transactions have to be completed by 31st March 2021 – which means the race is on, and the pressure on solicitors, in particular, is intense.
Delays in the conveyancing process are frustrating at the best of times, but when there is so much at stake, even more so. The answer might lie in indemnity insurance – a type of cover that could help solicitors sidestep delays and push transactions through completion in time to meet the March deadline.
What is indemnity insurance?
Indemnity insurance is used by solicitors during conveyancing transactions to cover any legal defects with the property that can’t be resolved quickly – or worse, at all. It covers a wide range of risks that are often encountered during the conveyancing process for all types of properties, from large commercial to small residential. Lack of planning consent, defective title indemnity and restrictive covenants are all covered, as are more common requirements such as chancel repair liability or contaminated land. Legal indemnity insurance covers both the buyer and the mortgage lender, in case there is any loss of value on the property as a result of the defect.
At Index Insure, we’ve built an intuitive and easy-to-use online platform for solicitors to order any legal indemnity policies they might require. Headed up by Rebecca Bottrell, we offer over 150 integrated legal indemnity policies, suitable for coverage for residential, commercial and mixed-use dwellings. The platform allows solicitors to order ready-made coverage or opt for a bespoke package depending on their needs, or they can simply request a hassle-free quotation.
How is indemnity insurance different?
Usually with insurance policies, regular premiums have to be paid and are renewed periodically, resulting in an annual fee. Indemnity insurance operates slightly differently, in that only one premium will need to be paid – and in most cases, the coverage will last forever.
In the instance that a mortgage is being used for the property purchase, the lender and purchaser will generally be insured together. The seller is generally expected to pay for the indemnity insurance, as a legal defect cannot usually be seen by a purchaser when the property is viewed and an offer made.
How can indemnity insurance help conveyancers to beat the Stamp Duty holiday deadline?
Indemnity insurance could be the answer that solicitors are looking for when trying to meet the March 2021 deadline. Search Delay or No Search insurance could be used to shorten the conveyancing process in cases where there are delays in receiving the information needed to complete the Local Authority Search process.
Search Delay covers financial loss incurred from an adverse matter that arises between the request for the searches and receipt – think contaminated land or any other matter that the buyer might have been aware of.
‘No Search’ indemnity insurance policies are designed for instances where a single property is being purchased without one or more searches being conducted at all. No Search covers the same risk as Search Delay but allows for a longer cover period as searches are effectively bypassed entirely.
In an ideal world, a conveyancer would always prefer that a purchase would complete with all due diligence completed, and the purchaser in possession of all the facts. A property purchase is almost certainly going to be the biggest of our lives, so it’s always the aim to have all ends tied up. However, with mounting pressure and no sign of ‘Sold Subject to Contract’ transactions slowing down, anyone wishing to take advantage of the significant Stamp Duty Land Tax savings might be left with no choice.
This article was submitted to be published by Index Property Information as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.