Property Indemnity Insurance: Because Sometimes Your Dream Home Has a Slightly Shady Past

So, you’re buying a home and everything’s going swimmingly. You’ve got your mortgage offer, you’ve picked your paint colours, and you’ve started watching DIY YouTube videos with misplaced confidence. Then your solicitor says, “We need to take out indemnity insurance,” and the vibe turns from Grand Designs to Crimewatch.

Don’t panic — you’re not buying a haunted house or a top-secret MI5 bunker (probably). Indemnity insurance is actually pretty common in the property world, and it’s not nearly as scary as it sounds.

Before we break it down, we have to say this is not legal advice, just good old-fashioned mortgage chat. Always speak to your solicitor for proper legal guidance.

What Is Property Indemnity Insurance?

Think of property indemnity insurance as the legal equivalent of putting a lid on a messy situation and taping it down. It's a policy that protects you and/or your mortgage lender against future financial risk from something dodgy or missing in the property's past — like a legal hiccup, a lost document, or a rebellious extension built without planning permission.

It doesn’t fix the problem, but it says, “If this comes back to bite us, we’ve got cover.”

Why Might a Mortgage Lender Insist On It?

Your lender is about to give you hundreds of thousands of pounds to buy this property. They want to be sure that if something goes pear-shaped later, their investment isn’t toast. Indemnity insurance is like their legal safety net.

Here are a few common situations where lenders get twitchy and say, “Yeah… we’re going to need a policy for that”:

1. Under-Value Transactions

Let’s say the property's market value is £200,000, but you’re buying it for £180,000 because:

• You’re buying from a family member

• Your landlord is offering a deal

• You’re just incredibly charming

To a lender, this can look a bit… suspicious. What if it’s being sold under duress? What if someone challenges the sale in future?

Indemnity insurance can protect the lender (and sometimes you) in case someone pops up claiming the sale wasn’t legit and wants to reverse it or seek compensation.

2. Missing Building Regulations or Planning Permission

That conservatory built in 1998? Looks nice, but nobody knows whether it got proper planning permission. Instead of tearing it down or chasing old council paperwork, you can often get an indemnity policy.

It says: “If the council gets grumpy later, the policy pays up.” (As long as you haven’t poked the council first — these policies are void if you go asking questions).

3. Missing Deeds or Rights of Access

You know that lovely garden path to your front door? Turns out the legal right to walk on it disappeared in a paperwork black hole. Don’t worry — indemnity insurance can cover that, too.

Same goes for:

• Missing easements

• Flying freeholds

• Old covenants with mysterious wording like “Thou shalt not keep swine upon the premises”

What Does It Cost?

The good news? Indemnity insurance is usually a one-off payment and not that expensive (we're talking anywhere from £20 to a few hundred pounds depending on the risk covered).

And bonus: it typically lasts forever, or at least until you sell the property.

Your solicitor will usually arrange it and the cost can often be negotiated between buyer and seller — though it’s usually the buyer that foots the bill if it keeps things moving.

But a Few Important Things…

• It doesn’t solve the problem — it just provides cover if the problem becomes a financial one.

• You can’t go and stir the pot — contacting the council or freeholder about the issue can invalidate the policy. So zip it.

• Always read the policy (or at least let your solicitor read it and then explain it in human terms).

Final Thoughts (and That Disclaimer Again)

Property indemnity insurance isn’t just another way to part you from your money — it’s actually a useful little tool to smooth over legal wrinkles and keep mortgage lenders calm. It’s not uncommon, it’s not suspicious, and it definitely doesn’t mean you’re buying a money pit (unless you are — in which case, may we recommend structural surveys and a therapist).

And finally, just so our compliance team can sleep at night: this blog is not legal advice. Please speak to your solicitor for specific guidance about your situation.