Restrictive Covenant Insurance
Legal indemnity insurance & policies
Legal indemnity insurance can prove useful if you have a restrictive covenant on your property. It can usually offer some type of solution for restrictive covenant issues or at the least some protection if things go wrong. You should ensure that you go over the covenant thoroughly before taking out legal indemnity insurance to check that there are no other options that might be appropriate for your issue. Many insurers offer insurance for restrictive covenant risks as long as there are no other methods of getting around the problem. There are several cases where restrictive covenant insurance will be appropriate.
To begin with one of the most common types of restrictive covenant is one put in place by the previous owner or the land owner which requires a new owner to seek their consent if they wish to build further on the land or to make any alterations to any existing structures. This can pose many difficulties to current owners. If the covenant was put in place by the original land owner, it can be very difficult to trace them if the covenant was put in place a long time ago. More often than not in these circumstances, the person that is selling the property is unaware that there is even a covenant on the property until the property is sold or they try to remortgage it. If work has been done to the property over 12 months ago, without the current owners being aware that a covenant was in place and this work was not challenged by the person who wrote the covenant, the current owner will be able to get restrictive covenant insurance to protect what they have done.
Another one of the most common restrictive covenant issues regards restricted uses of the property. In this instance the restricted activity must have been taking place for a considerable amount of time. An example of this would be if the owner of a shop had a covenant on their premises disallowing the sale of alcohol. If the owner of the shop was unaware of the covenant or had been selling alcohol for a considerable length of time without any complaints they would be eligible for restrictive covenant insurance.
Some properties have titles which state that there is a covenant placed on the building but the paperwork which describes what the covenant is has been lost. In cases such as these, it would be advisable to get restrictive covenant insurance.
An insurance policy of this kind will insure that a claimant will receive damages or compensation, the cost of altering or demolishing the property and the reductions in value of the property between the market value at when the covenant was enforced and what the value would have been on the current open market had it not been enforced. You may wish to ask for a custom made insurance policy that will cover the specific details of the covenant on your property. You can also request that the insurance cover not only you but future owners of the property as well.
The cost of a restrictive covenant insurance policy will depend on the value of the property at the time the insurance was taken out and the number of factors which it will cover. They can vary from hundreds of pounds to thousands depending on the buildings size, value and use. You should not contact anyone that you believe might be the original covenant owner before you try to take out a policy. If an insurance company finds out that contact has been made, they will usually refuse to ensure you.
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