Legal Q&A: should I pay to renew my expired indemnity policies?

I have paid off the mortgage on my flat which came with two indemnity policies when I bought it, but they have now expired. Do I need to pay to renew these policies or were they needed for the mortgage company?
      
Merrily Harpur
Fiona McNulty8 August 2016

Question: Ten years ago when I bought my flat I received two indemnity policies that have now expired. I paid off my mortgage without checking the situation regarding these policies and I now need to decide whether to pay for their renewal.

One is for an iffy environmental search and the other is because the property was built within three metres of a sewer — albeit almost 50 years ago.

Do you have any thoughts on whether these should be renewed, or were they perhaps just the desire of an overprotective mortgage company?

Answer: Indemnity insurance is often used where there are defects in the title to a property, or where there are problems or issues which would take a long time — or may be rather difficult — to resolve.

In certain circumstances indemnity insurers are prepared to insure against title defects or risks affecting a property provided certain conditions or the requirements of the insurer can be satisfied. Lenders often require indemnity insurance to be put in place to cover certain risks.

With regard to the environmental indemnity policy, it may be worthwhile obtaining an up-to-date environmental search, because the original issue may have been resolved now, and therefore indemnity cover may no longer be necessary.

When it comes to the indemnity policy for building over a sewer, clearly that is not something which will go away. You could take on the risk — or if you intend to sell the property at some stage in the future, your buyer or their lender may require indemnity insurance to cover this risk.

Ensure that any new policy covers you, your successors in title and lenders.

WHAT’S YOUR PROBLEM?
If you have a question for Fiona McNulty, please email legalsolutions@standard.co.uk or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE.

We regret that questions cannot be answered individually, but we will try to feature them here. Fiona McNulty is a legal director in the private wealth group of Foot Anstey.

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