Indemnity Insurance of Lost Documents Bank conveyancing obligations

Barclays and Coventry BS, as with many banks, dictate their own specific instructions when it comes to lost documents indemnity insurance. This page is designed to help conveyancing firms on the different lender solicitors panel where the title to be charged incorporates lost documents. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, whether it be Virgin Money, Natwest or Accord. The information on this page Is not to be read as lost documents indemnity insurance advice.

Need help with lost documents indemnity insurance from your lender?

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Chelsea BS and Yorkshire Building Society in common with most mortgage companies, requirements are that where lost documents indemnity insurance is effected:

• your practice is duty bound to spell out to the mortgagor that the borrower will need to adhere to any conditions of the lost documents indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in relation to the insurance
• your practice must approve the terms of the lost documents policy on behalf of the lender
• your practice must supply a copy of the lost documents indemnity insurance to the borrower and explain to the mortgagor why the lost documents indemnity insurance policy was effected and that a further policy could be necessary if there is further lending against the security of the property
• the lost documents indemnity insurance policy needs to be in favor of the bank and, if possible, for the benefit of the mortgagor and any next owner or lender. Where the mortgagor will not be protected by the lost documents indemnity insurance policy, you must advise the mortgagor of this fact.
• the lost documents indemnity insurance policy should not contain conditions which you know would void or compromise the interests of the lender
• you is obliged to reveal to the insurer all relevant information which you have obtained
• the minimum level of cover for the policy must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
• the lost documents indemnity insurance policy should be effected without cost to the lender

As to the level of cover for the lost documents indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for lenders:

Non lender-specific considerations

The full terms, conditions and exclusions for lost documents indemnity insurance are explained in the policy document. Conveyancing Practitioners are obliged to point the borrower to the lost documents indemnity insurance policy document. The intention of lost documents indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to determine that it is in order. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the lost documents indemnity insurance policy. Again, please check that this is as you expected.

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Significant characteristics and benefits of lost documents indemnity insurance :

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. Lost Documents indemnity insurance Policies should be checked for the following

• The out of pocket expenses 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.
• Market value reduction due to the successful enforcement of the risks specified in the lost documents 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 lost documents indemnity insurance, to the extent that such costs are rendered abortive by court order.
• All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• All sums paid with consent in writing from the insurance company to free the property from the risks specified in the lost documents indemnity insurance.
• Cover for compensation incurred in any action concerning the risks specified in the lost documents indemnity insurance, including incurred costs and expenses.

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Don't forget to consider what is excluded from the lost documents policy 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?

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Lost Documents Indemnity Insurance has limitations - Additional considerations

There may be consequences arising from the enforcement of the risks identified in the lost documents indemnity insurance which are not adequately covered by financial compensation.

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