Indemnity covenants in property transfers

The following Property practice note provides comprehensive and up to date legal information covering:

  • Indemnity covenants in property transfers
  • What is an indemnity?
  • When is an indemnity covenant needed in a transfer?
  • Property is subject to covenants
  • Property is subject to leases
  • Property is leasehold
  • The chain of indemnity
  • Drafting and approving the indemnity
  • Contractual provisions
  • HM Land Registry

Indemnity covenants in property transfers

This Practice Note looks at when an indemnity covenant should be given in a transfer of land. For general content on indemnities, see Practice Note: Guarantees and indemnities—general contract.

What is an indemnity?

An indemnity is a primary obligation and is an agreement by one party to bear the cost of certain losses or liabilities suffered by another party in certain circumstances.

Transfers of land often contain a covenant by the buyer to indemnify the seller against any losses suffered as a result of a breach of covenant by the buyer.

When is an indemnity covenant needed in a transfer?

A transfer should include an indemnity covenant where, following completion, the seller will remain liable, or potentially liable, under covenants affecting the property.

There are various situations where this might be the case.

Property is subject to covenants

A person who enters into a covenant regarding land will, when they come to sell the land, almost certainly require an indemnity from their purchaser in respect of that covenant. The purchaser and each successive owner of the land will then require a similar indemnity every time the property is transferred.

A chain of indemnity covenants created in this way is a common method of making successors in title liable for positive covenants but also arises where indemnity covenants have been given in respect of an obligation to comply with restrictive

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