Adverse Possession Indemnity Insurance Mortgage Company conveyancing requirements

Natwest and Skipton, like most mortgage companies, set their own specific instructions when it comes to adverse possession indemnity insurance. This page is designed to help conveyancing lawyers on the different bank conveyancing panel where the title to be charged incorporates adverse possession. Lawyers are advised to familiarise themselves with the CML handbook requirements for each mortgage company, for example Barnsley BS, Birmingham Midshires or Halifax. The content on this page is not focused on adverse possession indemnity insurance requirements.

Need help with adverse possession indemnity insurance from your lender?

---

RBS and Nationwide like the majority of lenders, obligations require that where adverse possession indemnity insurance is to be put on risk:

• the adverse possession indemnity insurance policy must be placed on risk at no expense to the bank
• your practice must approve the terms of the adverse possession policy on behalf of the mortgage company
• you must point out to the borrower that the borrower is obliged to adhere to 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 policy
• your practice is obliged to reveal to the insurer all relevant information which you have obtained
• the adverse possession indemnity insurance policy must not incorporate terms which you know would void or compromise the interests of the lender
• you must provide 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 mandatory if there is additional lending against the mortgaged property
• the adverse possession indemnity insurance policy should always be in favor of the lender and, wherever possible, in favour of the mortgagor and any future owner or mortgage company. If the mortgagor will not be covered by the adverse possession indemnity insurance policy, you must advise the mortgagor of this fact.
• the level of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )

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 Section 9.2 of the Part 2 requirements for banks:

Non lender-specific considerations

The extent of the terms for adverse possession indemnity insurance are set out in the policy paperwork. Property lawyers should point your non-lender client to the adverse possession indemnity insurance policy paperwork. The intention of adverse possession indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so you should check any draft to ensure it is in order. The lifetime of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.

---

Adverse Possession indemnity insurance: Significant features 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 Cover normally includes

• Market value reduction resulting from the successful enforcement of the risks specified in the adverse possession indemnity insurance.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the adverse possession insurance, to the extent that such costs are rendered abortive by court order.
• All sums paid with the written consent of the insurance company to free the land from the risks specified in the adverse possession policy.
• Reimbursement for compensation incurred in any proceedings concerning 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 out of pocket expenses 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.

---

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? Does it cover legal costs?

---

Adverse Possession Indemnity Insurance has limitations - Further considerations

There may be consequences arising from the enforcement of the risks identified in the adverse possession policy which are not adequately covered by financial compensation.

---

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