Building Regulations Indemnity Insurance

What Are The Building Regulations?

The building regulations indemnity insurance are based on the building regulations. These are a minimum standard for design, construction and building alterations. They aim to ensure the health and safety of people in and around buildings. The building regulations apply to most new buildings and many alterations to existing buildings in England and Wales.

Some examples of what the building regulations cover include:

• Structure – ensuring buildings are constructed to be structurally sound and stable
• Fire safety – provisions for means of escape and limiting fire spread
• Access – ensuring adequate accessibility and use of buildings
• Energy efficiency – conservation of fuel and power
• Electrical safety – ensuring the safety of electrical installations
• Drainage and waste disposal – sound drainage systems and sanitation

Local authority building control departments are responsible for checking building work complies with the building regulations. They must be notified before the building career starts. An independent building inspector, rather than the local authority, can certify work for large projects.

Failure to comply with the building regulations can put people and properties at risk. Where unapproved building work is discovered, the local authority can take enforcement action requiring changes. Insurance companies may also refuse to provide cover.

When Is Indemnity Insurance Required?

Indemnity insurance is taken out when there has been a breach of the building regulations to make a property saleable and mortgageable. It is typically required in the following situations:

• Work was completed without obtaining building regulations approval or a building control completion certificate.
• The previous owner carried out DIY work that breached regulations e.g. a loft conversion.
• A previous owner made unapproved alterations or extensions.
• The original builder is no longer trading to rectify any issues.

Without building regulation sign-off, mortgage lenders and purchasers would likely walk away from a property transaction. Indemnity insurance provides a safety net and reassurance that any non-compliant aspects are covered.

Some common reasons why building regulations approval may not have been obtained include:

• The owner was unaware of the requirement.
• The work was done by a contractor who failed to arrange building control.
• The owner carried out the work themselves without realising approval was needed.
• Previous owners cannot provide paperwork evidencing building regulations sign-off.

Who Needs Indemnity Insurance?

Indemnity insurance is usually purchased by whoever currently owns a property when they want to sell it or remortgage where there is uncertainty over building regulations compliance.

This is often required many years later when the current owner was not responsible for the unapproved works. They must deal with the consequences to ensure a smooth property transaction.

In some cases, indemnity insurance may be purchased proactively after becoming aware of unapproved works to prevent future issues.

The insurance provides cover for the property owner as well as the buyer or mortgage lender. It means the insurer deals with any problems relating to non-compliant building work.

What Does Indemnity Insurance Cover?

Indemnity insurance covers the costs incurred to rectify or rebuild defective building work to comply with regulations.

Policies usually cover up to at least £500,000 and often £1 million or more. They indemnify property owners for:

• Damages and claimants’ costs and expenses awarded by a court due to non-compliant work.
• Fees incurred to gain building regulations approval retrospectively.
• Professional fees such as architectural, legal and surveying costs.
• The cost of remedial works and alterations required to meet regulations.
• Diminution in value of the property as a consequence of the breach.

Insurers require a survey to assess the risk and determine an appropriate policy. Standard exclusions apply, such as wear and tear or pre-existing problems.

How Much Does Indemnity Insurance Cost?

The cost of indemnity insurance depends on several factors:

• Type of unapproved works – more complex issues cost more.
• Size of property – larger buildings cost more to cover.
• Sum insured – higher cover amounts increase the premium.
• Location – London and the South East are more expensive.
• Property type – flats incur a higher risk.
• Perceived risk – older properties cost more.

Typical building regulations indemnity insurance costs range from £200 upwards for minor works in low-risk areas. For more significant breaches, the premium can run into thousands of pounds.

Brokers provide quotations after assessing the particular circumstances and risks. It’s advisable to shop around by approaching several brokers to compare prices.

How To Buy Indemnity Insurance

Here are the steps involved in obtaining indemnity insurance coverage:

• Risk assessment – A surveyor visits the property to identify any areas of non-compliance and provides a risk report. This details the perceived severity, what remedial work may be required and an estimated cost.
• Apply to broker – Send the survey report to an insurance broker requesting a quotation for indemnity insurance to cover the specified building regulations breach. Provide details of the property and work carried out.
• Insurer underwriting – The broker approaches insurers and provides information to enable them to assess and price the risk. This may involve further inspection or technical review.
• Quote – You will receive a quote detailing the premium payable and policy coverage provided. Price, cover and excess can be negotiated to some extent.
• Acceptance – If you accept the quote, complete an application form and pay the premium. Check the policy wording carefully.
• Policy issue – The insurer will issue a policy certificate and schedule, providing evidence of your indemnity insurance cover. This can be delivered to mortgage lenders and purchasers.
• Make a claim – If an issue arises in future, contact the broker to make a claim under the insurance policy, providing details of the circumstances.

Going through a specialist building regulations broker who can access suitable products and negotiate terms is advisable. Allow sufficient time as it can take 4 to 6 weeks from initial risk assessment to obtaining a policy.

Why Is Indemnity Insurance Necessary?

There are several important reasons why building regulations indemnity insurance is often necessary:

• It avoids the need for costly and disruptive remedial building works – An indemnity policy means the property can be bought and sold without the need to obtain building control approval or carry out alterations retrospectively. This prevents major expenses and inconvenience.
• Mortgage lenders insist on it – Lenders need reassurance that any breaches of building regulations are covered. Otherwise, they will refuse to lend against a property. Indemnity insurance provides them with security.
• Purchasers require protection – Buyers want to know that any consequences arising from unapproved work are dealt with. Indemnity cover provides them with peace of mind.
• It prevents property sales from falling through – Without adequate cover for non-compliant building regulations, many transactions would not be completed at the eleventh hour. Indemnity insurance enables sales to proceed.
• Local authorities have limited powers – Council building control departments may take no action beyond issuing an informal notice. They cannot force owners to make changes or give financial penalties.
• It satisfies lawful requirements – The insurer is liable for financial loss from any building regulations requirements breaches. This fulfils legal obligations.

By enabling property sales and remortgages to proceed as usual, building regulations indemnity insurance provides a practical solution to potential deadlock situations. It circumvents problems that could prevent transaction sales from falling through and limit financing options.

Key Providers Of Indemnity Insurance

Many insurance companies and brokers can provide building regulations and indemnity insurance policies. Some of the critical providers include:

• London & European Indemnity – Specialist provider of building regulations, indemnity cover, and other indemnity insurance products. Can ensure minor to severe breaches.
• CLSL – Leading broker for various indemnity insurance policies, including building regulations cover. Access to a range of products from different insurers.
• John Ansell & Partners – Well-established insurance broker with expertise in building insurance and indemnity products. Nationwide service.
• Qdos Contractor – Broker offering building regulations indemnity insurance from A-rated insurers plus other liability and tax insurance.
• Axis Specialty London – Global insurer providing building regulations and planning permission indemnity insurance to brokers and insureds.
• Convex Insurance – Newer insurer focused on complex risks that provides building regulations cover alongside other commercial policies.
• Building Regulations Indemnity Direct – Specialist broker concentrating specifically on building regulations indemnity insurance products and services.

It can be beneficial to obtain quotes via several brokers to compare options from different insurers. Broker fees may also vary.

Frequently Asked Questions

Here are answers to some common questions about building regulations and indemnity insurance:

Conclusion

Breaching building regulations can have significant consequences for homeowners, preventing property sales and mortgages. Building regulations indemnity insurance offers a practical, cost-effective solution. Transferring liability to an insurer allows transactions to proceed smoothly, giving new owners peace of mind.

Indemnity cover is essential where uncertainty exists over compliance. Shopping between brokers will help secure an appropriate policy at a competitive price. With indemnity insurance in place, property owners have reassurance that any problems arising from unapproved works will be dealt with.