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Title Indemnity
A title indemnity policy (TIP) is an insurance policy that protects the owner of a property from financial loss when their property has a legal defect that cannot be resolved swiftly, inexpensively, or at all. A TIP can be taken out for many reasons, however it is commonly taken out when a person sells their property, to cover defects that only come to light during the conveyancing process. The TIP protects potential buyers from loss, and without it, the defects may deter prospective purchasers. A TIP requires one initial payment, after which policy covers the identified defects for the life of the property, there are no monthly payments or annual fees.
A TIP is tied to the property itself, not the owner. It is common for the seller of a property to take a policy out in their name prior to the purchaser taking title. This gives the purchaser peace of mind when buying a property with a legal defect, and it is inexpensive for the seller.
These policies do not remedy title defects but they do protect the owner of the property with the defect, by providing financial compensation or corrective conveyancing in the event of the defect causing loss, up to a pre-agreed limit. This maximum limit insured is usually the value of the property and different policies will have different excesses to pay.
Below are two common issues that are identified in the conveyancing process and that TIPs can help with:-
- Issues with planning permission and building regulations. If a property has been altered or built upon without planning permission approval, the local authority could take action for any alterations to be reversed. A TIP insures against the owner of the property having to pay for this, just the excess.
- Where there is a title defect, when a piece of land appears to form part of the property, however is not included in the legal title. For example, garden ground may actually be owned by someone else, e.g. the Council, yet has been occupied for a considerable period by the owner as theirs. By taking out a TIP, they would insure against the risk of the true owners of the land evicting them and taking it back for themselves. For this TIP to remain valid, the property owner must not make any contact with the true owners of the land, this is essential. If the true owners do come forward and attempt to take the land back, the TIP kicks in and the insurers will resolve the situation, most likely by paying to do the corrective conveyancing.
With time and expense, title defects may be capable of being remedied. However, TIPs provide a quick solution during the conveyancing process to protect the owners of properties, and prevent purchasers from withdrawing from sales. Should the need arise, conveyancing solicitors can advise on the different options available and arrange the TIP cover on the property owner’s behalf.
To find out more about how our conveyancing team can help with these types of insurances and other property matters please click here.
Author(s): Emma Taylor
