Indemnity insurance specialist Holly Hamer explains why there may be an unintended, but positive, benefit for conveyancers in the move towards upfront information.
The property industry’s move towards providing more comprehensive upfront material information is intended to create a more transparent and efficient homebuying process. By giving buyers access to key information at an earlier stage, they can make better-informed decisions, helping to reduce fall-throughs, minimise costly surprises, and improve confidence throughout the transaction.
Yet as title information becomes increasingly visible at the point of marketing, attention must also turn to what happens when risks are identified earlier in the transaction process. Far from reducing the need for legal indemnity insurance, the move towards upfront information may ultimately strengthen its role within the conveyancing process.
Historic defects
As listings on portals like Rightmove become more detailed, buyers are likely to encounter references to restrictive covenants, easements, rights of way, and other title matters much earlier in the transaction journey. This highlights the challenge that many of these issues could sound more concerning than they are in practice.
A restrictive covenant dating back 100 years may have little practical impact. A missing building regulation certificate may present a manageable risk, while an undocumented right of way may have existed unchallenged for decades.
Without insurance solutions, many transactions would stall while parties attempted to resolve historic defects which can be, slow, costly and potentially impossible to rectify. In many cases, legal indemnity insurance is what allows buyers, sellers, lenders and conveyancers to move forward with confidence.
The danger of greater disclosure is not necessarily the information itself, but how it is interpreted.
A new challenge
Consumers browsing property portals are unlikely to possess the legal knowledge required to assess the true significance of title matters. A restrictive covenant can easily be perceived as a deal-breaking issue when, in reality, an established insurance solution may already exist. This creates the risk that buyers become concerned by issues before understanding either the level of risk involved or the protections available.
The industry therefore faces a new challenge: ensuring transparency is accompanied by education and awareness of available solutions.
However, with all that being said, one of the more interesting questions is whether wider publication of title matters could create unintended consequences for insurers.
Historically, many title defects have only been known to the parties directly involved in a transaction. As more information is made publicly available through property listings and digital property packs, along with education on these matters, there is potential for a wider audience to become aware of those issues.
Increased awareness
Could beneficiaries of restrictive covenants become aware of breaches they previously knew nothing about? Could neighbouring landowners identify rights they may seek to enforce? In a nutshell, could this bring forward greater claims?
Whilst the extent of this risk remains uncertain, increased awareness often creates increased opportunity for enforcement.
If this results in a higher volume of notifications or claims, insurers may respond through more selective underwriting, increased premiums or tighter policy terms. The legal indemnity market has always evolved in response to risk, and greater transparency could become another factor shaping future underwriting decisions.
The more title issues are identified upfront, the more frequently buyers, lenders and conveyancers will need practical mechanisms to manage them. For years, legal indemnity insurance has often been viewed as a specialist product operating quietly in the background of transactions.
An essential tool
As material information becomes standard practice, insurance may increasingly be recognised not as an optional comfort blanket but as an essential transaction-enablement tool. It provides certainty where perfect solutions are unavailable, protects parties against potential financial loss and allows transactions to proceed where they may otherwise have been abandoned.
Without legal indemnity insurance, buyers may find themselves facing the cost of rectifying historic defects, defending enforcement action, negotiating with beneficiaries of restrictive covenants, or even suffering a reduction in the future marketability and value of their property.
In many cases, a relatively modest one-off premium can protect against risks that could otherwise result in legal costs, compensation payments or substantial financial loss running into thousands or potentially tens of thousands of pounds. As title issues become more visible earlier in the transaction process, consumers may come to better appreciate not only the existence of these risks, but also the value of the protection available against them.
A simple reality
The conveyancing industry remains divided about the benefits of upfront information, but greater disclosure inevitably brings greater awareness of risk, and where risk exists, protection becomes more valuable.
With the push for greater transparency, the future legal indemnity landscape may involve more scrutiny, more claims and potentially higher premiums. Yet it may also result in greater recognition of a simple reality which is that without legal indemnity insurance, a significant proportion of property transactions would struggle to progress at all.
Perhaps the question is no longer whether legal indemnity insurance is important, but whether upfront information will finally highlight how fundamental it has always been.
About the author
Holly Hamer is a senior development executive in real estate and construction legal indemnities. She has extensive experience in the legal indemnity and rights of light markets, advising on title risks and rights of light matters across acquisitions, disposals and development projects. She maintains strong relationships with a wide range of insurers, enabling her to secure effective and tailored risk transfer solutions for her clients.
One Response
I would be interested to know what indemnity insurers think of the government proposals for publishing title information/material information at point of listing. Presumably this would include details of existing indemnity insurance policies that cover existing title defects, and yet all policies require such cover to be kept confidential, disclosed only between potential buyers, their lenders and their respective legal advisors.
Would publication and inclusion in a property listing void the policy? How would the policy terms work in practice in the world envisioned in the government’s proposals for improving the home buying process?