Flying Freehold Indemnity Insurance: Who Pays?

Flying Freehold Indemnity Insurance: Who Pays?

When a property has a flying freehold — part of one freehold title overhanging or underlying another — most mortgage lenders require flying freehold indemnity insurance before completion. The standard practice in England and Wales is that the seller pays for the policy at the point of sale, although it is ultimately a matter of negotiation between the parties. This guide explains who normally pays, what the policy costs, what it covers and how to handle the question on a purchase.

What Is Flying Freehold Indemnity Insurance?

A flying freehold exists where one freehold property extends over (or under) a part of another freehold property — for example, a bedroom that projects over a neighbour's passageway, a cellar that runs beneath a neighbour's house, or a balcony that overhangs an adjoining title. The arrangement creates legal problems because the owner of the "flying" part has no right of support, shelter or access over the structure beneath or above it, and there is rarely a positive covenant forcing either owner to repair the shared structure.

An indemnity policy protects the buyer (and the buyer's lender) against the financial consequences of these defects, including the cost of legal action, loss of value if the defect crystallises, and the cost of remedial work in some policies.

Who Pays for the Policy?

In nearly all transactions, the seller pays for the flying freehold indemnity policy. There are three reasons for this:

• The defect attaches to the seller's property, so it is the seller's title problem to resolve
• The seller is in the best position to know how long the issue has existed and confirm no neighbour disputes
• It is the established convention — a buyer asked to pay would usually negotiate a price reduction equivalent to the premium

That said, the question is contractual rather than statutory. If the buyer particularly wants the policy and the seller refuses to fund it, the buyer can either pay themselves, ask for a price reduction, or walk away.

How Much Does It Cost?

Flying freehold indemnity premiums are usually a one-off payment, with cover continuing for as long as the buyer (and successors in title) owns the property. Typical costs in the UK market are:

• £40 to £100 for a small flying freehold on a property valued under £300,000
• £100 to £250 for a property in the £300,000 to £750,000 range
• £250 to £500 or more for high-value properties or complex flying freehold arrangements

The premium is heavily affected by the property value, the extent of the flying area and whether there is any history of disputes or remedial works.

When the Seller Refuses to Pay

If the seller refuses to fund the indemnity, the buyer has several options:

• Negotiate a corresponding reduction in the purchase price
• Pay for the policy themselves to keep the transaction moving
• Request that the seller approach the neighbours for a formal deed of covenant — usually a much slower and more expensive route
• Withdraw from the purchase if the lender will not accept the title without indemnity

In practice the cost of the policy is small enough that most sellers will fund it rather than risk losing the sale.

What the Policy Covers — and What It Does Not

A flying freehold indemnity policy is a defective title policy. It typically covers:

• Loss in market value if the defect causes a future sale to fall through or complete at a reduced price
• Legal costs of defending or pursuing a claim relating to the flying freehold
• The cost of resolving the defect — for example, securing a formal right of support — up to a stated limit
• Some demolition and reinstatement costs where these arise from the defective title

It does not cover:

• Physical damage to the building — that is buildings insurance, not indemnity
• Disputes that the buyer or seller actively triggers, for example by approaching the neighbour about the flying freehold
• Defects known to the buyer before completion that were not disclosed to the insurer
• Pre-existing disputes that have been notified or are in correspondence

Do Not Approach the Neighbours

One of the most important rules of indemnity insurance is that approaching the neighbour about the defect can invalidate the policy. Insurers price the policy on the assumption that the matter is dormant. If the buyer (or the buyer's solicitor) writes to the adjoining freeholder asking for confirmation of rights of support, the policy may be voided before it is even issued. Discuss this with your conveyancer before any contact is made.

Buildings Insurance Implications

A flying freehold is rarely a barrier to obtaining standard buildings insurance on the main property, but the situation should be disclosed to the buildings insurer to ensure the structure is correctly described. Where the flying section sits over communal areas or neighbouring buildings, a specialist insurer may want to confirm:

• Who is responsible for repairing the structure of the flying part
• Whether any party wall agreements are in place
• How rebuild costs are allocated between the affected properties
• Whether public liability for the flying area sits with the freeholder above or below

If the property is also a leasehold flat or part of a managed block, the freeholder or management company will normally arrange the buildings cover and the flying freehold is described in the policy summary.

Lender Requirements

Most high-street lenders accept flying freehold properties provided three conditions are met:

• The flying section represents a relatively small proportion of the property — usually under 15 per cent of total floor area
• An acceptable indemnity policy is in place from a recognised insurer
• There is no current dispute with the neighbouring freeholder

The UK Finance Mortgage Lenders' Handbook sets out specific criteria for each lender — your conveyancer will confirm the position before exchange.

For related background see our guides on flying freehold indemnity insurance, what is a flying freehold and freeholders.

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