Indemnity Insurance of Contaminated Land Mortgage Company conveyancing obligations

Chelsea BS and Barclays, like the majority of banks, set their own specific instructions when it comes to contaminated land indemnity insurance. The content herein aims to help property law firms on the numerous bank approved list of panel lawyers where the title for the the property to be mortgaged contains contaminated land. It is not a substitute for checking the CML handbook requirements for each mortgage company, be it Bank of Scotland, RBS or Yorkshire Building Society. The content on this page Is not to be read as contaminated land indemnity insurance advice.

Need help with contaminated land indemnity insurance from your lender?

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Birmingham Midshires and Nationwide like many mortgage companies, requirements are that where contaminated land indemnity insurance is effected:

• your practice must provide a duplicate of the contaminated land indemnity insurance to the borrower and explain to the mortgagor why the contaminated land indemnity insurance policy was effected and that a further policy may be required if there is further lending against the mortgaged property
• your firm is duty bound to spell out to the mortgagor that the borrower must adhere to any conditions of the contaminated land indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
• the limit of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
• the contaminated land indemnity insurance policy must be placed on risk at no charge to the bank
• your firm are responsible for approving the terms of the contaminated land policy on behalf of the mortgage company
• the contaminated land indemnity insurance policy must not incorporate conditions that you recognise would void or compromise the interests of the bank
• the contaminated land indemnity insurance policy should always be for the benefit of the bank and, if possible, for the benefit of the mortgagor and any next registered proprietor or lender. Where the mortgagor will not be covered by the contaminated land indemnity insurance policy, you must advise the mortgagor of this fact.
• your firm is required to disclose to the insurer all relevant information which you have acquired

Regarding the extent of cover for the contaminated land indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the CML handbook PII requirements for mortgage companies:

General Contaminated Land indemnity insurance points to consider

The extent of the terms for contaminated land indemnity insurance are explained in the policy paperwork. Conveyancing solicitors should direct the borrower to the contaminated land indemnity insurance policy document. Contaminated Land indemnity insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so you should check any draft to ensure it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the contaminated land indemnity insurance policy. Adequacy in this regard should be checked.

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Contaminated Land indemnity insurance: Important 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. Contaminated Land indemnity insurance Policies should be checked for the following

• 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.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
• Market value reduction resulting from the successful enforcement of the risks specified in the contaminated land policy.
• Reimbursement for compensation incurred in any proceedings regarding the risks specified in the contaminated land indemnity insurance, including fees of a legal nature.
• 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 contaminated land 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 property from the risks specified in the contaminated land insurance.

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You also need to be sure that the answers on the application form are correct. However remote the likelihood of a claim on the bank insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being paid out.

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Contaminated Land Indemnity Insurance has limitations - Further considerations

Contaminated Land 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 contaminated land indemnity cover will not necessarily be the answer.

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