A series of case study articles giving examples of the protection provided by specialist Legal Indemnity Insurance: peace of mind for the insured and risk management for property solicitors.
In this article, we look at a case study example of where CLS provided very specific Enforcement of Known or Unknown Rights of Way Insurance.
CLS Property Insight is highlighting how specialist Legal Indemnity Insurance, such as Enforcement of Known or Unknown Rights of Way Insurance, can protect not only residential and commercial property purchasers but also property developers.
Whether you are developing commercial or residential property the bottom line is that the key to successful property development is managing costs and risks. Without effective management, costs and overheads can spiral and profits disappear.
Developer insurance or pre-planning insurance?
Whilst CLS insurance has the catchy title of ‘Enforcement of Known or Unknown Rights of Way Insurance’ some property solicitors refer to it as ‘developer insurance’ as it can be used to minimise risks of developing a property where there is a risk that neighbours will seek to enforce known or unknown rights of way or easements during the build or redevelopment. For more information on easements read our guide on understanding easements. Please note, this is not the same as pre-planning insurance which is specifically designed for properties where planning permission has not yet been obtained. A guide to pre-planning insurance can be found here.
A case study
The insured had owned a commercial property since 2008. In 2016 the insured decided to capitalise on their investment and develop the property by adding two additional floors. The property owner did their research into the costs of the development and the potential profits to be gained and realised that there was a legal risk that might affect the money to be made out of the venture.
- The problem – During the planning and development process the insured realised that the title deeds of the commercial property made reference to a right of way granted by a 1975 conveyance to the owners of a neighbouring title. The insured was rightly cautious about legal claims eating into development profit and sought indemnity cover as he was concerned that the planned addition of two floors works would result in the neighbour being unable to exercise the rights of way granted in the 1975 conveyance. Known or Unknown Rights of Way Insurance cover was taken out.
- The claim – As the property developer had predicted, in May 2017 the leasehold owner of a neighbouring property wrote via his property solicitor to the insured stating that their purported right of way had been hindered for the duration of the building project (ten months at that point) and that they were owed compensation as a result. They also threatened the developer with an injunction application the purpose of which was to secure an order that the insured should cease work on the project. An injunction order would have been a financial nightmare to the developer who had contractors on site and deadlines to meet to make the venture profitable.
- Assessment – The insured’s solicitor reported the correspondence to CLS who, in turn, immediately instructed panel solicitors to look into the neighbours claim from the insurer’s perspective and put together a claim report. The case proved complex as trying to interpret what the authors of the 1975 conveyance had intended in terms of rights of way was not at all obvious. More information was sought from the insured to try and fill in the blanks.
- Solution – The insured property developer was understandably keen to reach a settlement without protracted court proceedings to enable the development of the two additional floors to proceed without further delay. The insured was proactive and sensible in his outlook to the problem and stated that he was willing to enter into a deed of easement with the neighbour to bring the threat of injunction proceedings to a fairly swift and amicable conclusion. The owner of the neighbouring property was happy to negotiate a formal deed of easement to ensure rights were clear. The CLS insurance policy funded the legal fees, amounting to £7,000, to ensure that the insured could complete the development of his commercial premises without any significant delay or costs save for the price of the Legal Indemnity Insurance policy.
- The take out – Legal Indemnity Insurance isn’t just for residential or commercial purchases. It also has a role to play when a property owner is looking to develop their property but fears the enforcement of known or unknown rights of way or easements jeopardising the completion of their project. In this case study, whilst the insured was prepared to negotiate and compromise over rights of way, he sensibly wanted the backing and protection of Legal Indemnity Insurance should the neighbour take the approach of pursuing injunction orders and claiming compensation.
If you are a property solicitor or construction lawyer it helps to know that there is a bespoke insurance policy available to help a property developer reduce the risk of having to fund expensive court claims without the benefit of any insurance.
CLS here to help
CLS has over 15 years of experience in helping conveyancers and construction lawyers with both residential and commercial property transactions. Our online portal is free to register and you’ll find our range of over 60 policies and products at your fingertips – including Variable Statements of Fact to let you customise to your client’s needs for the full range of legal indemnity policies. Online indemnity insurance protection is available within a matter of minutes. If you’d rather speak to someone, we also have a team of specialists who can help you out with a bespoke offline policy. Click here to start working with us.
This article was submitted to be published by CLS Property Insight as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.
