Adverse Possession Indemnity Insurance Lender conveyancing requirements

Lloyds TSB and Skipton, like most mortgage companies, set 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 to be charged contains adverse possession. Solicitors should still check the CML handbook requirements for each bank, be it Leeds Building Society, HSBC or Bank of Scotland. The information 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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Chelsea BS and Nationwide as with many mortgage companies, requirements are that where adverse possession indemnity insurance is to be taken out:

• your practice is duty bound to spell out to the mortgagor that the borrower is obliged to comply with any conditions of the adverse possession indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in respect of the insurance
• your firm must supply a copy 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 a further policy could be required if there is supplemental lending against the mortgaged property
• the adverse possession indemnity insurance policy should not contain terms that you know would invalidate or compromise the interests of the bank
• the adverse possession indemnity insurance policy should always be in favor of the bank and, wherever possible, in favour of the borrower and any future registered proprietor or mortgagee. If the borrower will not be covered by the adverse possession indemnity insurance policy, the mortgagor should be advised accordingly.
• your practice are responsible for approving the terms of the adverse possession policy on behalf of the lender
• the adverse possession indemnity insurance policy must be effected without charge to the mortgage company
• your firm is required to reveal to the insurer all relevant information which you have gathered
• the minimum level of cover for the policy must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )

Regarding the extent 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:

General Adverse Possession indemnity insurance points to consider

The full terms, conditions and exclusions for adverse possession indemnity insurance are shown in the policy document. Property lawyers are obliged to direct the borrower to the adverse possession indemnity insurance policy document. The intention of adverse possession indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so you should check any draft to ensure it is correct. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.

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Important aspects and benefits of adverse possession Contingency insurance :

The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the adverse possession indemnity insurance schedule. Adverse Possession indemnity insurance Policies should be checked for the following

• All sums paid with consent in writing from the insurance company to liberate the land from the risks specified in the adverse possession insurance.
• Reimbursement for compensation incurred in any action regarding the risks specified in the adverse possession indemnity insurance, including fees of a legal nature.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
• The cost of works (including professional fees) for the purpose of the development commenced, prior to 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 order.
• Diminution in value resulting from the successful enforcement of the risks specified in the adverse possession insurance.
• The cost 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.

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Always consider what is not included in the adverse possession insurance e.g. does the policy cover any residence that has been altered within the year prior to the commencement of the policy? Does it cover legal costs?

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Further 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 above information is in relation to properties in England and Wales.