Are you aware of the risks of buying a property with a restrictive covenant? These covenants can restrict property use and development, and violating them can lead to legal action. There is a way to protect your investment and give you peace of mind. Many property purchasers purchase restrictive covenant indemnity insurance to safeguard against financial loss and legal fees. This insurance covers the cost of legal defence and property value loss. This article discusses how restrictive covenant insurance can give purchasers peace of mind.
What is Restrictive Covenant Indemnity Insurance?
Restrictive covenant indemnity insurance protects property buyers and sellers from financial losses caused by property restrictions. If the restrictive covenant is breached, this insurance policy protects both parties financially.
How Does Restrictive Covenant Indemnity Insurance Work?
If a property has a restrictive covenant, the insurance policy will cover any damages or losses caused by the covenant’s breach. During property ownership, the policy usually covers losses and legal fees.
Who Needs Restrictive Covenant Indemnity Insurance?
Restrictive covenant indemnity insurance is most useful for homeowners who:
• Have restrictive covenants on the title of their property. These are legal restrictions on how the property can be used, like prohibiting commercial activity or certain building modifications.
• Live in neighborhoods with homeowners associations that enforce restrictive covenants. Breaching the covenants can result in fines or legal action.
• Want to protect themselves from potentially expensive compensation claims from neighbors. If a restrictive covenant is breached, affected neighbors can sue for compensation, and the costs could easily run into the thousands of pounds.
• May accidentally or unknowingly breach a restrictive covenant. Even inadvertent or minor breaches can lead to compensation claims.
• Are planning property renovations or changes of use. This makes it more likely a restrictive covenant could be breached.
• Have limited funds to pay compensation claims out of pocket if a restrictive covenant is breached. The insurance acts as a financial safety net.
• Want peace of mind knowing they’re covered in the event a restrictive covenant issue arises. The insurance can cover legal costs, compensation payments and reverting property modifications to become compliant again.
• Are required to have restrictive covenant indemnity insurance by their mortgage lender or freeholder as a condition of their property purchase.
How to Obtain Restrictive Covenant Indemnity Insurance?
Restrictive covenant indemnity insurance is available from many insurers. The insurance policy’s cost depends on the property’s value and terms. To ensure adequate coverage for your needs, carefully review the policy terms.
What is the Cost of Restrictive Covenant Indemnity policy in the UK
The costs for restrictive covenant indemnity policies range from around:
- £50 to £150 per year for basic policies covering a small number of standard restrictive covenants.
- £150 to £300 per year for properties with multiple restrictive covenants and/or higher value neighboring properties.
- £300 to £500+ per year for properties with many restrictive covenants, expensive neighboring properties, and/or a claims history.
Factors Affecting the Cost of Restrictive Covenant Indemnity cover
1. Type of Property – The policy’s cost depends on the insured property. Residential properties may have a lower premium than commercial properties due to the lower risk of a covenant breach.
2. Property Value – Another factor affecting policy cost is property value. A higher-value property may have a higher premium due to the potential for higher covenant breach damages.
3. Location – The policy’s cost depends on the property’s location. The premium may be higher if the property is in a high-risk covenant breach area.
4. Covenant Terms – The policy’s cost may depend on the covenant’s terms. The premium may increase if the covenant is stricter.
What Does Restrictive Covenant Indemnity Cover?
Restrictive covenant indemnity insurance covers a variety of issues resulting from a breach. These problems include:
1. Legal Costs – The insurance will cover your legal fees if you’re sued for violating a restrictive covenant.
2. Loss of Value – The insurance will cover losses if a restrictive covenant breach lowers the property’s value.
3. Damages – If you breach a restrictive covenant and damage someone else’s property or person, the insurance will cover your damages.
5 Best Restrictive covenant indemnity insurance companies
These insurance companies are among the best:
Countrywide Legal Indemnities:
One of the UK’s most prominent legal indemnity insurers is Countrywide Legal Indemnities. Their policies include restrictive covenant indemnity policy, and their policy issuance turnaround time is usually 24 hours.
DAS Legal Expenses Insurance
DAS Legal Expenses Insurance has a solid reputation. Their policies include restrictive covenant indemnity insurance. Policyholders offer 24/7 legal advice.
Legal & General
UK insurance and financial services provider Legal & General. Their policies include restrictive covenant indemnity coverage. Policy issuance is quick and easy online.
First Title Insurance
Title and indemnity insurance are First Title Insurance’s specialities. Their policies include restrictive covenant indemnity insurance. They offer policyholders a 24/7 claims helpline.
CLS Property Insight
CLS Property Insight provides property search and risk management services. Their policies include restrictive covenant indemnity coverage. Their policy issuance turnaround time is usually 24 hours.
Benefits of having restrictive covenant indemnity policy
1. Protects against financial loss: It protects the property from restrictive covenant breach claims.
2. Peace of mind: Property owners can rest easy knowing they’re protected from legal issues with this insurance.
3. Legal costs: The insurance policy covers all restrictive covenant defence legal fees.
4. Increases property value: This insurance shows potential buyers that the property has protection against legal issues.
5. Easy to obtain: Insurance providers sell this type of insurance quickly and easily.
6. Covers undiscovered restrictive covenants: The insurance policy protects against undiscovered restrictive covenants.
7. Protects seller and buyer, making property sales easier: This insurance protects both parties, making property sales easier.
In conclusion, restrictive covenant indemnity insurance can protect property buyers and sellers from financial losses caused by restrictive covenants. To ensure adequate protection, carefully review the policy terms and obtain the appropriate coverage.