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Bespoke risk policies for borrowers

Nia Williams

September 17, 2013

The Law Society has highlighted the increasingly common practice of drawing up policies to cover risks which may be caused by planning permissions or building regulations.

Eddie Goldsmith, senior partner at property solicitors Goldsmith Williams, said: “Indemnity policies such as these are increasingly used to manage risk.

“Such policies are not routinely required by lenders as they rely upon the conveyancer to protect their interests and address any property-related risks that might impact upon the lender’s security.”

The lender is primarily concerned with its security and not the impact the risk may have on the client, for example if a small extension did not have planning permissions it may not pose a risk to the lender should it have to be taken down at a later date because of a low loan to value.

But the cost to the borrower will be much greater because they will have to pay for a new extension.

Such indemnity policies which involve a one-off payment can last for decades and can be a useful way of managing some of the risks within property transactions.

Goldsmith said it is critical that such policies are used appropriately so that the client’s interests are best served and a policy is only issued where necessary.

He added: “Brokers should be aware of these policies and ensure that they work with conveyancers who operate in a client-centric way using their expertise and networks to recommend a law firm which is both reputable and experienced in property matters.

“Those experienced firms will be best placed to make a sound judgement on when indemnity policies are or are not in the client’s best interests.”


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