Indemnity Insurance of Adverse Possession Mortgage Company conveyancing instructions

Virgin Money and Nationwide, in common with many banks, dictate their own specific instructions when it comes to adverse possession indemnity insurance. The content herein aims to help property law practitioners on the numerous mortgage company solicitors panel where the title to be charged includes adverse possession. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example HSBC, Yorkshire Building Society or Barnsley BS. The information on this page is not focused on adverse possession indemnity insurance requirements.

Need help with adverse possession indemnity insurance from your lender?

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Bank of Scotland and Skipton as with the majority of lenders, instructions are such that where adverse possession indemnity insurance is to be taken out:

• the adverse possession indemnity insurance policy needs to be for the benefit of the bank and, if possible, in favour of the mortgagor and any future registered proprietor or lender. Where the mortgagor will not be covered by the adverse possession indemnity insurance policy, you must advise the mortgagor of this fact.
• your firm is obliged to disclose to the insurer all relevant information which you have gathered
• you is duty bound to point out to the borrower that the borrower must adhere to any conditions of the adverse possession indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the policy
• your firm are responsible for approving the terms of the adverse possession policy on behalf of the mortgage company
• the limit of indemnity must satisfy the requirements for the bank (See Part II Handbook requirements )
• the adverse possession indemnity insurance policy must not incorporate conditions that you know would invalidate or compromise the interests of the lender
• you must send a duplicate of the adverse possession indemnity insurance to the borrower and explain to the mortgagor why the adverse possession indemnity insurance policy was effected and that additional insurance may be required if there is supplemental borrowing against the security of the property
• the adverse possession indemnity insurance policy must be placed on risk at no charge to the lender

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:

General Adverse Possession indemnity insurance points to consider

The full terms, conditions and exclusions for adverse possession indemnity insurance are set out in the policy document. Conveyancing solicitors are obliged to direct your non-lender client to the adverse possession indemnity insurance policy itself. Adverse Possession indemnity insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the adverse possession indemnity insurance policy. It is well worth checking that the time frame is correct.

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Adverse Possession Contingency insurance: Important aspects 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 should be checked for the following

• Expenses for works (including architects’ and surveyors’ 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 decision.
• Diminution in value due to the successful enforcement of the risks specified in the adverse possession insurance.
• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the adverse possession insurance, as well as solicitors charges.
• 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.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Money paid with the written consent of the insurance company to free the property from the risks specified in the adverse possession indemnity 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 be invalidated.

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Additional considerations for adverse possession indemnity insurance

Adverse Possession Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that adverse possession indemnity cover will not necessarily be the right solution.

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