Indemnity Insurance of Obstruction of Access Bank conveyancing obligations
Nationwide and Leeds Building Society, like the majority of banks, dictate their own requirements when it comes to obstruction of access indemnity insurance. The content herein aims to help property law practitioners on the different mortgage company conveyancing panel where the title for the the property to be mortgaged contains obstruction of access. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each lender, be it Chelsea BS, Yorkshire Bank Home Loans or Barclays. The information on this page is not focused on obstruction of access indemnity insurance requirements.
Need help with obstruction of access indemnity insurance from your lender?
Halifax and Godiva Mortgages like the majority of mortgage companies, obligations require that where obstruction of access indemnity insurance is to be put on risk:
- your firm must provide a duplicate of the obstruction of access indemnity insurance to the borrower and explain to the borrower why the obstruction of access indemnity insurance policy was effected and that additional insurance could be necessary if there is additional borrowing against the mortgaged property
- you must explain to the borrower that the borrower is obliged to adhere to any conditions of the obstruction of access indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in relation to the policy
- the obstruction of access indemnity insurance policy must be for the benefit of the bank and, wherever possible, in favour of the mortgagor and any next registered proprietor or bank. If the borrower will not be protected by the obstruction of access indemnity insurance policy, the borrower should be advised accordingly.
- the obstruction of access indemnity insurance policy should be placed on risk without charge to the bank
- your firm must approve the terms of the obstruction of access policy on behalf of the mortgage company
- the obstruction of access indemnity insurance policy should not incorporate conditions which you are aware would invalidate or compromise the interests of the mortgage company
- the minimum level of cover for the policy must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your practice is obliged to disclose to the insurer all relevant information which you have acquired
| Lender | Requirement |
|---|---|
| Accord Buy to Let | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Adam & Company International | The open market value of the property according to the valuation report. |
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Barclays plc | Higher of purchase price or valuation |
| Chelsea Building Society | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Coventry Building Society | Minimum of the value of the property. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Investec | The open market value of the property according to the valuation report. |
| JPMorgan | 110% of principal sum. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Saffron Building Society | Higher of purchase price or valuation. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). |
| St James Place | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
General Obstruction of Access indemnity insurance points to consider
The extent of the terms for obstruction of access indemnity insurance are set out in the policy document. Conveyancing Practitioners should point the borrower to the obstruction of access indemnity insurance policy itself. The intention of obstruction of access indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so it’s important to check the document to ensure it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the obstruction of access indemnity insurance policy. Adequacy in this regard should be checked.Significant characteristics and benefits of obstruction of access indemnity insurance :
Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Obstruction of Access indemnity insurance Cover normally includes- The cost of works (including professional fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the obstruction of access policy, to the extent that such costs are rendered abortive by court decision.
- Reimbursement for compensation incurred in any action regarding the risks specified in the obstruction of access policy, as well as legal and associated costs.
- Market value reduction due to the successful enforcement of the risks specified in the obstruction of access indemnity insurance.
- All sums paid with consent in writing from the insurance company to liberate the land from the risks specified in the obstruction of access policy.
- The out of pocket expenses of altering or taking down 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.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
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 obstruction of access policy will be invalidated.
Further considerations for obstruction of access indemnity insurance
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from obstruction of access insurance may be adequate for your client. Information contained within this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company approved panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the bank indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most obstruction of access Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The above information covers to properties in England and Wales.