What Is an Indemnity Policy – And Why Might You Need One?

When buying or selling a property at auction, unexpected legal issues can crop up – and that’s where an indemnity policy comes in handy.

What is it?

An indemnity policy is a one-off insurance policy that protects against specific legal problems related to a property – not the physical defects, but potential legal risks.

What does it cover?

It typically includes:

• Legal costs and damages from breaches like:

  
  

  • Lack of planning permission

  • Building regulation issues

  • Restrictive covenants

  • Disputed access rights

  
  

How does it work?

• If a defect is discovered (e.g. no planning approval for an extension), a policy can be bought to cover any future claims.

• It provides peace of mind for both buyer and seller, often speeding up the sale.

When is it needed?

• During the legal checks before a property transaction.

• Common in auction sales where quick resolutions are key.

Key takeaway:

An indemnity policy won’t fix the problem, but it can shield you from the financial fallout – making it a valuable tool in smooth auction property transactions.