
Intelligent Real Estate Due Diligence
IREDD Insights
Topical Discussions by Industry Experts
Legal Indemnity Insurance:
Enhancing Institutional Appeal in Commercial Real Estate
Moz Gamble, Client Director Legal Indemnities, IREDD, May 2025
One of the key themes explored during discussions at this year’s UK Real Estate Investment & Infrastructure Forum (UKREiiF) was the increasingly strategic role that legal indemnity insurance plays in making commercial property assets institutionally acceptable.
Legal indemnity insurance has become a powerful tool for mitigating risks associated with real estate transactions. It provides protection against potential legal defects such as missing easements, restrictive covenants, rights of light issues, or planning irregularities - any of which might otherwise stall or derail a deal. These issues, while often resolvable over time, can lead to protracted delays and rising costs. By transferring these risks to insurers, legal indemnity policies allow investors, lenders, and developers to proceed with confidence and certainty.
In today’s competitive investment environment, where institutional capital increasingly dominates, having a clean and insurable title is not just advantageous, it’s essential. Institutional investors typically operate within strict parameters and require robust risk mitigation frameworks before committing capital. Legal indemnity insurance meets this need by providing a safety net that aligns with due diligence expectations, helping ensure that assets meet the threshold for institutional acceptance.
This is particularly relevant in the rapidly expanding Purpose-Built Student Accommodation (PBSA) sector, which was a topic at UKREiiF. The PBSA market continues to attract significant institutional interest due to resilient demand and long-term income potential. However, to satisfy return expectations and ensure smooth acquisition or refinancing processes, real estate sponsors must demonstrate that legal and regulatory risks have been fully addressed. Legal indemnity insurance supports this by streamlining transactions and offering peace of mind for investors, developers, and financial stakeholders alike.
In addition to de-risking, legal indemnity products can be tailored with enhancements that provide long-term cover or accommodate future development potential, adding further value to the transaction. These features benefit all parties - investors gain confidence, lenders reduce exposure, and developers can focus on delivery without the burden of complex legal remediation.
As the real estate sector continues to evolve, tools like legal indemnity insurance will remain vital in unlocking value and facilitating deals in an increasingly cautious and compliance-driven investment landscape.
IREDD Insights
Topical Discussions by Industry Experts
Risk in Real Estate Transactions
Join Moz Gamble and Clive Moys, as they provide practical tips for dealing with the risks in real estate transactions.
IREDD Insights
Topical Discussions by Industry Experts
Data Standards
Stephen Spooner, Non-Executive Director, IREDD, Aug 2020
If you are in the insurance industry, even as a real estate specialist, you could be forgiven for missing the significance of the Open Standards Consortium for Real Estate (OSCRE) having made their data model available for free use.
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Well done if you got past the first paragraph, it shows admirable fortitude. “Why is it of interest to me?” I hear you say. “Isn’t this just stuff for those involved in a technology niche serving property managers or possibly the arcane sub-niche of property valuation?” Good points, but no. Please stay with me.
Commercial real estate data is particularly opaque for two reasons:
1. It is complex because it is multi-layered due to the plethora of interested parties and sources;
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2. As a result of that complexity it is hard to create a unified picture of the data constellation that relates to each asset. Many businesses just don’t bother to collect or manage data beyond their immediate needs.
The massive, lucrative and economically critical real estate industry has traditionally handled this with a surprisingly consistent approach. It employs lawyers to take the risk that it may have misunderstood what it has bought. This is particularly prevalent when it comes to transactions.
The ancient due diligence ritual acted out when assets are traded, leased or financed requires a great deal of time to gather and minutely examine the epistles, scrolls, indentures, deeds and assorted instruments that together define the rights to be conferred on the purchaser, tenant or lender. To be fair most of these documents are now available in electronic form, although much of it is no better than taking a photograph. This is a soul-destroying task when carried out, even if it just once. I know this from personal experience but it gets worse. The exact exercise is often repeated on multiple occasions for the same asset because for each “event” at least one party has to perform the ritual, again.
Why?
Essentially the desire to limit the risk that that value will be adversely affected by a previously unknown legal or physical impediment. There is no trust between parties operating, fundamentally, on a philosophy of caveat emptor. The parties have agreed terms for a contract on the basis of a set of facts, many of which are only assumed at the moment of that agreement. The party that instigates (and funds) the ritual is rarely interested in the artefacts themselves, in fact it is normally only concerned to know if there is any aspect if the findings that might trigger a loss. This is evidenced by the frequency of occasions on which the lawyer is asked to report on “exceptions” only. A reminder: this is the ritual which has probably been enacted before, possibly quite recently and to a higher standard.
We have a situation where data is extracted from text or graphics, analysed and dumped, again and again. Little or no effort is made to preserve or categorise this information, let alone give it structure.
Why?
There are several reasons. Thank goodness, because to do this with no, or even few, reasons would be crazy right? I submit that these are the reasons:
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There is no benefit to those who are paying for the work because they only have an interest in that single transaction and there insufficient data to be relevant to other portfolio assets.
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There is no benefit to the lawyer because the chances of being asked to perform the same exercise on the same asset again are small. Furthermore, the lawyer’s income is often generated by charging for hours spent reviewing and reporting, even if the outcome is simply a report that says, “it’s fine.”
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The lawyer has a potential liability if the data is incorrectly translated from its textual source and re-used for other purposes. That liability would be reflected either in increased professional indemnity insurance premiums or worse, cover becoming unavailable
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There is no point unless the data can be profitably be used in a structured form.
Make no mistake, the cost of repeating these exercises is very large but that is not the most expensive aspect. Time is the enemy of all transactions and these rituals are truly profligate in its use. Weeks or even months pass while the dance is dutifully performed. All anybody wanted was protection from the unforeseen, but the only defence was a microscope rather than a satellite. This is like getting a doctor to pay your salary if you have to take sick leave, without access to any research data or patient information other, than her own observations.
We are now in an age where vast databases are linked to give insight into risks, trends and causation but many aspects of real estate are (and will remain) invisible without the structure that data standards bring. Some examples of data models that are now available and open for use without incurring use charges:
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Internationally, OSCRE members have supported and facilitated the creation of thousands of carefully considered definitions of real estate data points for over 20 years. The value of time and expertise invested in these “pigeon holes” in which to park and find information is incalculable but unquestionably vast.
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In the UK, a meticulously designed system for identifying “parcels” of real property, in three dimensions, has come through a long and troubled gestation to provide an anchor for an array of physical, social and economic information that is looking for relevance.
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The Royal Institution of Chartered Surveyors is providing the means to trade in data that has been assembled to the meet their global professional standards. These cover valuation, measurement and construction, with other areas to follow.
These are just the most recent examples of an expanding infrastructure which will provide opportunities to:
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challenge outdated practices;
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employ technologies like machine reading;
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bring real liquidity to real estate;
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reduce transaction costs;
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renew and adapt the built environment to meet challenges of climate change or pandemics;
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provide valuable information to other aspects of local, national and global economies.