Indemnity Insurance of Lost Documents Mortgage Company conveyancing obligations

Barnsley BS and Chelsea BS, in common with most lenders, have their own specific instructions when it comes to lost documents indemnity insurance. The content herein aims to help domestic conveyancing practitioners on the various bank approved list of panel lawyers where the title for the the property to be mortgaged incorporates lost documents. Lawyers are advised to familiarise themselves with the CML handbook requirements for each mortgage company, whether it be HSBC, Leeds Building Society or RBS. 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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Accord and Yorkshire Bank Home Loans like many lenders, obligations require that where lost documents indemnity insurance is to be put on risk:

• your practice are responsible for approving the terms of the lost documents policy on behalf of the bank
• the lost documents indemnity insurance policy should always be for the benefit of the mortgage company and, wherever possible, in favour of the borrower and any subsequent registered proprietor or lender. Where the mortgagor will not be covered by the lost documents indemnity insurance policy, you must advise the borrower of this fact.
• you must supply a copy of the lost documents indemnity insurance to the mortgagor and explain to the mortgagor why the lost documents indemnity insurance policy was effected and that a further policy might be mandatory if there is additional borrowing against the mortgaged property
• the minimum level of cover for the policy must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• the lost documents indemnity insurance policy must be placed on risk at no charge to the lender
• the lost documents indemnity insurance policy should not incorporate terms which you are aware would invalidate or prejudice the interests of the mortgage company
• your practice is duty bound to spell out to the mortgagor that the borrower is obliged to comply with any conditions of the lost documents indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the policy
• your firm must reveal to the insurer all relevant information which you have acquired

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 Paragraph 9.2 of the CML handbook PII requirements for banks:

Lost Documents Contingency Insurance : Reflections

The extent of the terms for lost documents indemnity insurance are identified in the policy paperwork. Property lawyers are obliged to point your non-lender client to the lost documents indemnity insurance policy itself. Lost Documents indemnity insurance is designed to provide 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 agreement is in perpetuity unless otherwise stated in the lost documents indemnity insurance policy. It is well worth checking that the time frame is correct.

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Significant aspects and benefits of lost documents indemnity insurance :

The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the lost documents indemnity insurance schedule. Lost Documents indemnity insurance Policies should be checked for the following

• All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the lost documents policy.
• Liability for damages or compensation incurred in any action regarding the risks specified in the lost documents policy, as well as fees of a legal nature.
• Expenses for 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.
• Market value reduction due to the successful enforcement of the risks specified in the lost documents insurance.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• 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.

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

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Lost Documents Indemnity Insurance has limitations - Additional considerations

Lost Documents 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 lost documents indemnity cover will not necessarily be the answer.

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