NAVIGATING INDEMNITY CLAUSES IN COMMERCIAL REAL ESTATE

As a commercial real estate solicitor, I frequently have to consider whether indemnity clauses are needed and how they should be drafted to best suit the intentions of the client to balance protection and commercial practicality. These clauses can have broad implications for both sellers and buyers.

What Are Indemnity Clauses?

Indemnity clauses allocate financial risk in a transaction, requiring one party to compensate the other for specific losses or liabilities arising after the sale or transfer of property. You’ll spot these in both contracts for sale and the deed of transfer.

The Pros

• Risk Management:

  
  

  Indemnity clauses provide clarity on which party bears certain risks, protecting against unforeseen issues (like unregistered disputes or environmental breaches).

  
  

• Negotiation Flexibility:

  
  

  Tailored clauses can address particular concerns, helping both sides reach a deal even where standard warranties fall short.

  
  

• Recourse for Losses:

  
  

  If a covered issue arises post-completion, the indemnity gives direct financial recourse, often without the need to prove a contractual breach.

The Cons

• Potential for Broad Liability:

  
  

  Poorly drafted indemnities can expose a party to significant, open ended liabilities.

  
  

• Enforcement Complexity:

  
  

  Enforcing indemnity claims may involve substantial legal work, especially if the language is ambiguous.

  
  

• Impact on Deal Dynamics:

  
  

  Excessive or one-sided indemnities can stall negotiations or even put deals at risk if the parties can’t agree on reasonable terms.

 Top Tips

• Always review indemnity wording carefully, precise, clear drafting is essential.

  
  

• Consider capping liability or providing exceptions to avoid unlimited risk.

  
  

• Consult a specialist solicitor early to balance protection and commercial practicality.

Whether you're buying or selling, indemnity clauses deserve close attention. Get in touch if you’d like advice tailored to your next transaction.

Indemnities in property transactions can change risk allocation and may increase risk or cost for parties if not carefully handled.

Contact FG Solicitors today on 0808 172 93 22 or complete our quick contact form for a no obligation discussion!

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This update is for general guidance only and advice should be taken in relation to a particular set of circumstances.