Mortgage Company conveyancing panel conditions re Obstruction of Access Indemnity Insurance

Halifax and Natwest, as with the majority of banks, have their own specific instructions when it comes to obstruction of access indemnity insurance. The content herein aims to help conveyancing firms on the numerous lender approved list of panel lawyers where the title to be charged contains obstruction of access. Solicitors should still check the CML handbook requirements for each mortgage company, be it RBS, Barnsley BS or Barclays. The information on this page is not focused on obstruction of access indemnity insurance requirements.

Need help with obstruction of access indemnity insurance from your lender?

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Chelsea BS and Lloyds TSB like the majority of banks, instructions are such that where obstruction of access indemnity insurance is to be put on risk:

• you are responsible for approving the terms of the obstruction of access policy on behalf of the lender
• the obstruction of access indemnity insurance policy must be placed on risk at no cost to the bank
• you is duty bound to point out to the borrower that the borrower must adhere to any conditions of the obstruction of access indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
• the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )
• your firm is required to disclose to the insurer all relevant information which you have obtained
• you must supply a duplicate of the obstruction of access indemnity insurance to the mortgagor and explain to the mortgagor why the obstruction of access indemnity insurance policy was effected and that a further policy might be required if there is supplemental lending against the security of the property
• the obstruction of access indemnity insurance policy must be for the benefit of the mortgage company and, if possible, for the benefit of the borrower and any next registered proprietor or mortgage company. Where the mortgagor will not be covered by the obstruction of access indemnity insurance policy, the borrower must be informed accordingly.
• the obstruction of access indemnity insurance policy should not incorporate conditions that you recognise would invalidate or prejudice the interests of the lender

As to the level of cover for the obstruction of access 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 lenders:

General Obstruction of Access indemnity insurance points to consider

The extent of the terms for obstruction of access indemnity insurance are shown in the policy paperwork. Property lawyers are obliged to direct the borrower to the obstruction of access indemnity insurance policy itself. The intention of obstruction of access indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to determine that it is as it should be. The continuance of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.

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Significant characteristics and benefits of obstruction of access indemnity insurance :

The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the obstruction of access indemnity insurance schedule. Obstruction of Access indemnity insurance Policies should be checked for the following

• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the obstruction of access insurance, including fees of a legal nature.
• Money paid with consent in writing from the insurance company to free the property from the risks specified in the obstruction of access indemnity insurance.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
• Diminution in value resulting from the successful enforcement of the risks specified in the obstruction of access insurance.
• 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.
• The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, before the commencement of proceedings for the enforcement of the risks specified in the obstruction of access policy, to the extent that such costs are rendered abortive by court order.

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Don't forget to consider what is not included in the obstruction of access 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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Additional considerations for obstruction of access indemnity insurance

Obstruction of Access insurance may satisfy lenders such as Leeds Building Society or Bank of Scotland and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.

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