When is indemnity insurance used in a property sale?
Indemnity insurance is a one-off policy that protects a buyer and their lender against the financial loss from a specific legal defect, such as missing building regulation approval or a breached covenant. It is a quick way to deal with historic problems in a sale, but it pays out only if the risk actually leads to a loss, and it is void if the issue is raised with the council.
Read more in our guide: Selling a problem property
Common indemnity policies
| Policy | What it covers |
|---|---|
| Lack of building regulation consent | Enforcement costs for unapproved works |
| Lack of planning permission | Enforcement for an unauthorised change or works |
| Breach of restrictive covenant | Claims by those who benefit from a covenant |
| Lack of easement | Loss of access or service rights |
| Chancel repair | Liability to contribute to church repairs |
| Search indemnity | Loss from matters a search would have revealed |
How it works
The policy is bought once, usually by the seller, and benefits the buyer, their lender and future owners. Premiums are often modest, from tens to a few hundred pounds, depending on the property value and risk. It covers the loss in value or cost of putting things right if the risk materialises, not the fixing of the defect itself.
When it cannot be used
- If the council or the person with the benefit of a covenant has already been contacted about the issue.
- Where the defect is a safety risk, such as unsafe electrics or structural failure; insurance does not make a building safe.
- Where the buyer's lender will not accept it.
Planning time limits
Councils cannot normally take planning enforcement action once a breach has existed long enough. Since 25 April 2024, the limit in England is 10 years for most breaches, replacing the old four-year rule for building works and changes of use to a dwelling. Breaches that became immune before that date stay protected. A policy can bridge any gap.
For rental property
HMO conversions, loft rooms and flats created without consent are common in older portfolios. Some issues are better fixed than insured: a missing licence, a fire safety gap or poor escape routes can expose a buyer to fines and rent repayment orders that insurance will not cover.
Official Sources and Further Reading
General information for landlords in England, checked against official sources in October 2026. It is not tax, legal or financial advice: speak to a qualified accountant or solicitor about your own circumstances.
Frequently Asked Questions
Indemnity insurance is a one-off policy that protects a buyer and their lender against the financial loss from a specific legal defect, such as missing building regulation approval or a breached covenant. It is a quick way to deal with historic problems in a sale, but it pays out only if the risk actually leads to a loss, and it is void if the issue is raised with the council.
Usually the seller, since the defect is theirs, but it is negotiable.
Yes. Some buyers, or their lenders, prefer the issue resolved, for example with a retrospective consent.
Often yes, through a regularisation application, but it alerts the council and may require opening up work for inspection.
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