You have found your first home or your dream home and you are eager to sign on the dotted line and get the keys. However, when you meet with your solicitor to discuss the contract and title to the property, you are advised that there is a title issue.
Typical issues could be missing title deeds, lack of right of way for access or services, an ongoing breach of a restrictive covenant in a Lease or an extension which has been built over, or near to, a public sewer. Your heart sinks. Problems, in general, usually mean delays, increased costs and uncertainty. What you don't expect is for your solicitor to suggest that these issues could be dealt with by insuring the risk by obtaining a title indemnity policy. Title Indemnity Insurance is a form of insurance which protects owners and mortgage lenders against financial loss resulting from challenges to or defects in title by transferring the risk to the insurer. The vendor in the transaction is responsible for paying the premium. Usually, the cover lasts forever, or at the very least, the term of the mortgage; and the limit of indemnity is the value of the property. A map of the property will need to be produced and sometimes a Statutory Declaration of the vendor.
These type of policies were virtually unheard of in our jurisdiction a decade ago. Any defects in title were dealt with, if they could be, by way of, but not limited to, rectifying deeds or granting of easements. However, there has been a shift in conveyancing practice in Northern Ireland over the last ten years whereupon, the first thought, when uncovering a title problem is to insure the risk. This is a result of the increased pressure on vendors to complete the transaction as quickly as possible. Remedying the problem by means of rectification or a grant of an easement can take considerable time, money and the outcome is not guaranteed. For example, the owner of the field next to you, which your utility services currently cross, may refuse to grant you the formal right of way required by a purchaser in order to sell your property. However, a draft title indemnity policy to cover the risk of your neighbour refusing to let your services cross their land, could be available in a few clicks of a mouse. The premiums could be much cheaper than rectifying the problem and there is certainty of outcome. If a claim is made it will be dealt with by way of litigation, settlement or indemnity by the insurer. However, of paramount importance, any efforts to fix the problem can render the defect uninsurable. So in this example, no attempt must be made to talk to the neighbour about the easement required as this may jeopardise the chance of obtaining insurance and potentially the transaction and others in the chain.
The market for title indemnity insurance has increased drastically and so have the risks which can be covered. Title Indemnity Policies are now commonplace in the conveyancing process, arguably supplementing the skill and due diligence required of the solicitor in completing your transaction. Most lenders are happy to accept these policies with the title and usually don’t ask to see them before the transaction completes.
Your solicitor ought to explain the terms of the policy to you. The main points to note are that as long as you are aware of its existence, do not do anything which may render the policy invalid and notify the insurer of a claim if one arises, you can be content that the problem on title has been dealt with.