I had two properties in the same chain exchange contracts today. At varying times, I wondered whether this milestone would be achieved due to mounting frustrations over the common phenomena, ‘if in doubt’ seek an indemnity policy. In this instance it was a tale of three indemnity policies, none of which were supported as being necessary by the respective homeowners.
Many modern developments are subject to a Management Company who collect fees for estate services. If you live on such a development, my advice would be to request and pay for the management pack as soon as your property goes under offer. The packs can take a few weeks to arrive depending on the efficiency of the Management Company. In my experience, their provision is often a delay factor in achieving a swift completion.
This transaction had an inauspicious start when the vendors at the top of the chain decided to purchase a new build and link it to their sale having previously marketed their home as ‘chain free.’ Always a smart move if you want to infuriate the lower chain from the outset. Another consequence of this was the need to complete within a prescribed timeline as the new build developer insisted upon a swift exchange of contracts. The indicative completion date was provisionally set before Christmas, which duly came and went.
If this wasn’t unsettling enough, the road to exchange of contracts took several twists and turns that ultimately required three indemnity policies to resolve formalities.
The complete chain involved the sale of four properties and I represented the middle two sets of clients. Clients B were three down from the top and buying the property owned by Clients A who were two down from the top. Clients A were buying the new build at the top of the chain, which had caused all the consternation about rushing to complete before Christmas to satisfy the house-builder. Just to add to the mix, Clients A and B lived on the same road.
It came to light the road they lived on had never been adopted by the local authority. A Section 38 Highways Adoption Agreement had never been produced following completion of the development. As a consequence the solicitor representing the buyer of Client B’s property insisted on the provision of a bespoke indemnity policy that also required them to sign a statutory declaration to satisfy lender requirements. The policy was sought to protect the buyer and preserve her right in perpetuity to access the property in light of its status as an ‘unadopted’ road. The policy had to address the lack of clear rights of way over the private road to access the property and the risk of demands towards the costs of adopting the roads and footpaths.
It is deemed best protocol for the vendor to pay the costs for an indemnity policy and Clients B immediately set about contacting the local authority to find out when they would be adopting the road in an attempt to avoid paying for the indemnity policy. Although the local authority confirmed they had every intention of adopting the road at some point in the future, they could not confirm when this would be. Clients B resisted the need for a bespoke policy, which cost marginally more than a standard policy, and took the view the buyer should fund the difference in costs between the two policies.
A stalemate ensued over a nominal sum of money until the buyer contacted me and threatened to withdraw from the purchase as a matter of principle. Common sense finally prevailed with Clients B agreeing to both the bespoke policy and the extra costs but it took several weeks to break the deadlock.
In the meantime, the solicitor for Clients B decided the same approach was required in respect of their onward purchase as coincidentally both properties were on the same road. Client A then dug their heels in for identical reasons and objected to pay for the policy. Just to compound matters, Clients A were also asked to provide an indemnity policy in response to an issue relating to the Estate Rent Charge that had not been satisfactorily resolved. The rent charge owner is entitled to grant a long lease of the burdened property to trustees for the purposes of raising income to recover arrears, plus enforcement costs and the cost of granting the lease. In light of this, the solicitor for Clients B required confirmation that either Section 121 of the Law Property Act 1925 had been excluded or a Freehold Rent Charge Indemnity Policy.
To say confusion reigned would be an understatement. Neither Clients A nor B had experienced any difficulty buying their properties in the absence of a Section 38 Agreement and the estate rent charge remained a mystery to both. It resulted in a plethora of communications across the chain and much discord. The transactions hung in the balance for several weeks with all parties becoming fractious.
Everyone was frustrated and the overwhelming sentiment upon achieving exchange of contracts was one of relief rather than exaltation. Given the sums of money at stake, the costs of the indemnity policies were fairly minimal. Rather than contest them, it would have proved far less stressful and much quicker to have simply paid for them without protest.
Section 38 Highways Adoption Agreement Under Section 38 of the Highways Act 1980, a local highway authority can enter into a legal agreement with a developer to adopt a highway providing the highway has been constructed to a specified standard and to the satisfaction of the local highway authority.
All That Glitters Is Not Sold 