Adverse Possession Indemnity Insurance Bank conveyancing requirements
Natwest and Birmingham Midshires, in common with many lenders, have their own specific instructions when it comes to adverse possession indemnity insurance. This page is designed to help residential conveyancing solicitors on the various mortgage company solicitors panel where the title for the the property to be mortgaged contains adverse possession. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, for example Godiva Mortgages, Chelsea BS or Accord. The content on this page is not focused on adverse possession indemnity insurance requirements.
Need help with adverse possession indemnity insurance from your lender?
Yorkshire Bank Home Loans and Virgin Money as with most banks, requirements are that where adverse possession indemnity insurance is to be taken out:
- the adverse possession indemnity insurance policy must be effected at no cost to the bank
- the adverse possession indemnity insurance policy should not contain terms that you recognise would void or prejudice the interests of the lender
- the adverse possession indemnity insurance policy should always be for the benefit of the lender and, wherever possible, in favour of the borrower and any future registered proprietor or lender. Where the borrower will not be covered by the adverse possession indemnity insurance policy, you must advise the borrower of this fact.
- your firm must approve the terms of the adverse possession policy on behalf of the mortgage company
- the minimum level of cover for the policy must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- your practice 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 a further policy may be necessary if there is additional lending against the mortgaged property
- you must disclose to the insurer all relevant information which you have acquired
- your firm must spell out to the mortgagor that the borrower must 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 respect of the policy
| Lender | Requirement |
|---|---|
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Bank of Scotland Private | Not less than the Facility plus 10%. |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| RBS- First Active | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| 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. |
| Yorkshire 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. |
General Adverse Possession indemnity insurance points to consider
The full terms, conditions and exclusions for adverse possession indemnity insurance are explained in the policy paperwork. Property lawyers should point the borrower to the adverse possession indemnity insurance policy paperwork. Adverse Possession Contingency insurance is devised to grant indemnity in respect of the risks specified in the policy schedule - so you should check any draft to determine that it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the adverse possession indemnity insurance policy. Adequacy in this regard should be checked.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 are likely to cover the following- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- The out of pocket expenses 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.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development commenced, before the commencement of proceedings for the enforcement of the risks specified in the adverse possession insurance, to the extent that such costs are rendered abortive by court decision.
- Cover for compensation incurred in any action regarding the risks specified in the adverse possession policy, including legal and associated costs.
- Money paid with the written consent of the insurance company to liberate the land from the risks specified in the adverse possession insurance.
- Market value reduction due to the successful enforcement of the risks specified in the adverse possession policy.
Don't forget to check what is not included in the adverse possession indemnity insurance e.g. does the policy cover any property 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 - Additional considerations
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 answer. Information contained within 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 lender 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 content set out above is in relation to properties in England and Wales.