Bank conveyancing panel requirements re Adverse Possession Indemnity Insurance
Godiva Mortgages and Leeds Building Society, as with most lenders, have their own specific instructions when it comes to adverse possession indemnity insurance. The content herein aims to help property law practitioners on the different lender conveyancing panel where the title for the the property to be mortgaged includes adverse possession. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Birmingham Midshires, Yorkshire Building Society or Virgin Money. 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?
Accord and HSBC as with many lenders, requirements are that where adverse possession indemnity insurance is to be taken out:
- your practice 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 may be required if there is supplemental lending against the security of the property
- the limit of indemnity must meet the requirements for the bank (See Part II Handbook requirements )
- your firm is required to disclose to the insurer all relevant information which you have acquired
- the adverse possession indemnity insurance policy should not incorporate conditions which you recognise would void or prejudice the interests of the bank
- the adverse possession indemnity insurance policy should be effected at no expense to the bank
- your firm must explain to the mortgagor that the borrower is obliged to 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 approve the terms of the adverse possession policy on behalf of the mortgage company
- the adverse possession indemnity insurance policy needs to be in favor of the mortgage company and, wherever possible, for the benefit of the mortgagor and any subsequent registered proprietor or mortgagee. If the borrower will not be covered by the adverse possession indemnity insurance policy, you must advise the borrower of this fact.
| Lender | Requirement |
|---|---|
| Aviva Equity Release | Full value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| 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. |
| Clydesdale Bank | Open market value of property. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Hinckley and Rugby | The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest. |
| ITL Mortgages | Minimum of the value of the property. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Lloyds | The value of the property. |
| Masthaven Bank | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Platform | 110% of principal sum. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Scottish Widows | The value of the property. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| Topaz Finance | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
Adverse Possession Contingency Insurance : Reflections
The full terms, conditions and exclusions for adverse possession indemnity insurance are shown in the policy document. Property lawyers are obliged to point the borrower to the adverse possession indemnity insurance policy itself. The intention of adverse possession indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to ensure it is correct. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Significant features 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 Cover normally includes- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- The cost of altering or demolishing 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.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the adverse possession indemnity insurance, including solicitors charges.
- Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the adverse possession indemnity insurance.
- Market value reduction due to the successful enforcement of the risks specified in the adverse possession indemnity insurance.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to 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.
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 policy being put on risk? Are legal costs covered?
Adverse Possession Indemnity Insurance has limitations - Supplemental considerations
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. Content on this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company solicitor 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 adverse possession 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 is in relation to properties in England and Wales.