An introduction to pre-planning Insurance for developments
CLS Property Insight (CLS PI) offers pre-planning insurance for properties where development is intended, but where planning permission has not yet been obtained.
We can offer cover for minor alterations and low limit of indemnity enquiries, for example where an extension is likely to be erected. We can also provide cover for larger limit of indemnity sites and more complex developments.
CLS PI can offer coverage using a two-staged approach meaning that only a percentage of the premium is due upfront. Once planning permission has been granted and the insured is confident that they wish to progress with the acquisition of the property, the remaining premium is due. There are clear benefits for both the insurer and the insured using this approach.
How does Pre-planning Insurance work?
When requesting pre-planning cover, please make sure that you provide us with the ultimate Gross Development Value (GDV) of the property. The total premium due under the policy will be reflective of this sum. As mentioned previously, we only require a percentage of this premium up front. We call this our 1st stage premium. The 1st stage premium will be calculated as a percentage of the overall premium and will be based on the risk nature of the property and the sum insured under the 1st stage.
The 1st stage sum insured will need to be calculated by the person who would be the one making the claim, the proposer. This will mean, that any losses that the proposer believes that they will suffer, prior to planning permission being granted, will need to be calculated and included here. This would be expected to reflect the associated costs in acquiring the land (if necessary) together with potentially abortive planning permission costs and fees, legal fees and any architectural costs should development proposals need to be altered.
The 1st stage cover would protect the insured for losses that they could suffer should a claim present itself following the application for planning permission.
Using a Restrictive Covenant policy as an example; should the beneficiary of the covenants come forward during the consultation period, and attempt to enforce the covenants to restrict the development, the 1st stage element of the policy would protect the insured by negotiating with the beneficiary. This may involve entering into a Deed of Release, providing a monetary/settlement payment or changing the architectural plans of the development to satisfy the beneficiary etc including any legal fees.
Should the claimant’s concerns be alleviated, and the insured wishes to proceed with the development, the insured would pay the 2nd Stage premium which will thereafter cover the total GDV (minus any costs incurred under stage 1). At this stage, if another beneficiary comes forward restricting the development on material grounds, CLS would cover the losses up to the GDV should the development be unable to commence/continue and will continue to protect any successors in title should claims arise once the development is fully complete.
Benefits of Pre-planning Insurance
Having a staged policy allows underwriters to be more flexible in accepting risk as our exposure is limited under the 1st stage offering.
It should be noted that once the 1st stage premium has been paid the 2nd stage premium and coverage – will not alter, other than any increase in the limit of indemnity, and unless otherwise stated in our terms, even where material issues have arisen during the planning stages. This is a major benefit of our policy as it can be a great concern for property developers where pre planning insurance is not available, as the proposer has little or no comfort that they will be able to benefit from obtaining insurance once planning permission has been obtained, particularly if material objections have been raised.
The other major benefit is, should the insured be unhappy with any change of development plans prior to the payment of the second stage and decide that the development is no longer viable for their plans, it means that they would not proceed to the 2nd stage cover, so their financial losses have been reduced as they have not had to pay the full premium in the outset.
There is also a benefit for Land Promoters/current owners of land who wish to seek pre-planning insurance to protect the security to a prospective developer of the land, they can implement the policy, pay the 1st stage premium and the 2nd stage would be paid by the developer and thus minimising the cost to the Land Promoter/current owner of the land.
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 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. Online indemnity insurance protection is available within a matter of minutes. If you’d rather speak to someone, we also have a team of specialists who can help you out with a bespoke offline policy. Click here to start working with us.
This article was submitted to be published by CLS Property Insight 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.