A case reported by the BBC on the 10th of May 20181 highlighted how local authorities are clamping down on individuals who build or alter a property without the necessary planning permission. Mr Naseem was subject to this when he applied for planning permission to build a home for his family, which was 76 cm too tall. Despite not obtaining permission he went ahead and built a house worth £500,000. The local authority took action against him and advised that he either demolishes the property or pays £200,000 to replace the roof. Having spent his entire budget on construction, he did not have the necessary funds to finance this.
What may come as a surprise to property owners is that if you buy a recently built or altered property, you may still be held responsible for any failure on the part of the vendor to have obtained the necessary planning permission. As the purchaser you would stand to incur a substantial financial loss if the local authority orders the property’s demolition or alteration.
Indemnity insurance for lack of planning permission and building regulations approval is becoming one of the most common types of legal indemnity insurance taken out by property owners. This covers any financial loss which property owners may suffer if the vendor had not obtained the appropriate planning permission or building regulations.
A standard planning defect policy would provide cover to the lender and property owner in an event that the local authority took action for breach of planning or building regulations. However, this type of insurance is usually only available for work that was carried out at least 12 months ago. Therefore, ensuring that the correct searches of the property have been conducted accordingly is particularly beneficial and Gallagher can offer a no search indemnity policy if there is limited time during the transaction process.
Gallagher are able to assist with bespoke legal indemnity insurance which provides protection against planning defects that is readily available, and cost effective. Payment of a single premium provides ongoing indemnity that can run from one property owner to the next. Please contact us for more information.