Bank conveyancing panel requirements re Adverse Possession Indemnity Insurance

Yorkshire Building Society and Birmingham Midshires, like many mortgage companies, have their own specific instructions when it comes to adverse possession indemnity insurance. The purpose of this page to assist property law firms on the different lender solicitors panel where the title for the the property to be mortgaged contains adverse possession. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Lloyds TSB, Virgin Money or Coventry BS. The content on this page Is not to be read as adverse possession indemnity insurance advice.

Need help with adverse possession indemnity insurance from your lender?

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Santander and Bank of Scotland as with most lenders, instructions are such that where adverse possession indemnity insurance is effected:

• your firm is duty bound to point out to the borrower that the borrower must comply with any conditions of the adverse possession indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the policy
• your practice must disclose to the insurer all relevant information which you have acquired
• the level of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
• the adverse possession indemnity insurance policy must not contain conditions that you know would invalidate or compromise the interests of the mortgage company
• your firm must approve the terms of the adverse possession policy on behalf of the bank
• your firm must provide a copy of the adverse possession indemnity insurance to the mortgagor and explain to the borrower why the adverse possession indemnity insurance policy was effected and that a further policy may be required if there is further lending against the security of the property
• the adverse possession indemnity insurance policy should be effected at no charge to the bank
• the adverse possession indemnity insurance policy should always be in favor of the mortgage company and, if possible, for the benefit of the borrower and any next registered proprietor or bank. Where the borrower will not be protected by the adverse possession indemnity insurance policy, you must advise the mortgagor of this fact.

Regarding the extent of cover for the adverse possession indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for mortgage companies:

Non lender-specific considerations

The extent of the terms for adverse possession indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners should direct the borrower to the adverse possession indemnity insurance policy paperwork. The intention of adverse possession indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to determine that it is as it should be. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the adverse possession indemnity insurance policy. Again, please check that this is as you expected.

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Adverse Possession indemnity insurance: Important features and benefits:

This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Adverse Possession indemnity insurance Policies are likely to cover the following

• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the adverse possession policy, including fees of a legal nature.
• All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Market value reduction resulting from the successful enforcement of the risks specified in the adverse possession insurance.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development commenced, before the commencement of proceedings for the enforcement of the risks specified in the adverse possession indemnity insurance, to the extent that such costs are rendered abortive by court decision.
• The cost of altering or destroying all, or part of the development and the reinstatement of the land, insofar as such alteration, demolition or re-instatement is made necessary by court order.
• Money paid with consent in writing from the insurance company to liberate the property from the risks specified in the adverse possession insurance.

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As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the adverse possession policy will not be valid.

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Adverse Possession Indemnity Insurance has limitations - Further considerations

Adverse Possession insurance may satisfy lenders such as Skipton or Yorkshire Bank Home Loans and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.

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The content set out above covers to properties in England and Wales.