Many Local Authorities have either stopped processing searches or are experiencing lengthy delays as a result of the current Coronavirus pandemic. Some clients have asked what alternatives are available to them to allow a purchase to proceed without searches. One such option is search insurance.
Do you need to make full searches, or should you take out search insurance?
‘Need’ is probably the wrong word to use when talking about searches – it’s all a matter of assessing the risks and seeing how comfortable you feel with taking them. It’s true that making full searches on a property is more costly than insurance and can take anywhere between five days to several weeks (likely much longer in circumstances such as Covid-19) to come back to us to interpret for you. Waiting for search results could potentially extend the time it takes to exchange contracts and to complete your purchase.
Whilst taking insurance saves money and time, you must also accept that insurance does not guarantee complete protection or certainty and the gamble could end up costing more money in the long term, if searches would have revealed some issues that could stop you buying the property.
So what’s the difference between searches and indemnity insurance?
Full searches can include:
– Drainage and Water Search*
– Local Authority Search*
– Coal Mining Search*
– Environmental Search
– Other searches as are required in certain circumstances
*routinely obtained for most properties in Burnley and surrounding areas.
Search insurance is a policy which provides cover should something be found negatively to affect the value of a property.
| Full Searches | Search Indemnity Insurance |
| Can take days or several weeks (currently longer) Varies on property and locality Gives full official information on property and risks however does not provide insurance Can help you to decide about whether or not to go ahead with the purchase | Can be done very quickly (usually within a couple of hours) Premium assessed according to the price of the property Gives no detailed information about potential risks to the property. Does provide protection in the event that something should affect the value in future |
Remember, the cost and time it takes to make searches can vary drastically according to the locality in which the property is based. Some councils will have a faster turnaround time than others however we are finding many Councils have either stopped dealing with searches or have increased their turnaround times dramatically due to Covid-19.
Mortgage Lenders (if applicable)
Some mortgage lenders will stipulate that the borrower must make full searches as part of their terms and conditions. This varies between different mortgages and lenders, so it’s best to ask your mortgage advisor if in any doubt. These conditions are not usually negotiable, so assume that you must make searches if your lender requires them.
Uncertainty
It is not just about saving money by taking the cheaper insurance. To an extent, searches can reveal aspects of the property you may not discover until moving in (and which the sellers are either unaware of or reluctant to reveal). So, whilst search insurance does provide some cover in the case of a reduction to the value of a property, it offers no protection to your living quality once you have moved in. For instance, moving into a property which is liable to heavy flooding or subsidence is still likely to be a nasty shock and somewhat difficult to put up with, regardless of search insurance.
It’s especially worth considering if these sorts of things may be enough to put you off the property entirely and also when you come to sell the property a new buyer making full searches may reveal issues to stop them purchasing from you, if this affects something that had been a major selling point. For example, if a spectacular view had been one of the reasons you put an offer on a certain property, a search might reveal an upcoming building development which could potentially spoil the view and completely change your mind! It all comes down to weighing up the risks – there is no “silver bullet” answer which applies to every transaction.
Whilst you may authorise us to take out this insurance, should anything reveal itself in the future and you wish to make a claim, would you wish to encounter potential difficulties making a claim? It is not uncommon for insurance companies (whether for search, home, car, etc. insurance) to try to wriggle out of accepting a claim. In a perfect world it would be better to have the information upfront (i.e. via searches being obtained) so you can make an informed decision as to whether to proceed and avoid any hidden surprises.
April 2020
Baldwin Wyatt Solicitors