Adverse Possession Indemnity Insurance Lender conveyancing requirements

HSBC and RBS, as with many lenders, set their own requirements when it comes to adverse possession indemnity insurance. This page sets out to enlighten residential conveyancing lawyers on the various lender solicitors panel where the title to be charged includes adverse possession. It is not a substitute for checking the CML handbook requirements for each lender, for example Barnsley BS, Lloyds TSB or Bank of Scotland. 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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Halifax and Yorkshire Bank Home Loans in common with most mortgage companies, instructions are such that where adverse possession indemnity insurance is effected:

• your practice must provide a duplicate of the adverse possession indemnity insurance to the mortgagor and explain to the mortgagor why the adverse possession indemnity insurance policy was effected and that additional insurance may be mandatory if there is further lending against the security of the property
• the adverse possession indemnity insurance policy needs to be for the benefit of the mortgage company and, if possible, for the benefit of the mortgagor and any next owner or mortgage company. If the borrower will not be covered by the adverse possession indemnity insurance policy, the borrower must be informed accordingly.
• you is obliged to reveal to the insurer all relevant information which you have acquired
• your practice are responsible for approving the terms of the adverse possession policy on behalf of the bank
• the minimum level of cover for the policy must meet the requirements for the bank (See Part II Handbook requirements )
• the adverse possession indemnity insurance policy must not incorporate terms that you know would void or compromise the interests of the mortgage company
• the adverse possession indemnity insurance policy must be effected at no expense to the mortgage company
• your practice must point out to the borrower that the borrower will need to comply with any conditions of the adverse possession indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the insurance

As to the level of cover for the adverse possession indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the Part 2 requirements for lenders:

Adverse Possession Contingency Insurance : Reflections

The extent of the terms for adverse possession indemnity insurance are set out in the policy document. Conveyancing Practitioners are obliged to point the borrower to the adverse possession indemnity insurance policy itself. The intention of adverse possession indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the document to determine that it is correct. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the adverse possession indemnity insurance policy. Adequacy in this regard should be checked.

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Adverse Possession Contingency insurance: Significant aspects and benefits:

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. Adverse Possession indemnity insurance Policies should be checked for the following

• Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the adverse possession insurance.
• Diminution in value resulting from the successful enforcement of the risks specified in the adverse possession policy.
• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the adverse possession insurance, as well as incurred costs and expenses.
• Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, before the commencement of proceedings for the enforcement of the risks specified in the adverse possession policy, to the extent that such costs are rendered abortive by court order.
• 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.
• All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company

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Don't forget to check what is excluded from the adverse possession policy e.g. does the policy cover any residence that has been altered within the year prior to the commencement of the policy? Are legal costs covered?

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Additional considerations for adverse possession indemnity insurance

Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from adverse possession insurance may be adequate for your client.

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