Indemnity Insurance of Obstruction of Access Bank conveyancing requirements
Natwest and Chelsea BS, in common with the majority of mortgage companies, dictate their own specific instructions when it comes to obstruction of access indemnity insurance. This page sets out to enlighten domestic conveyancing firms on the numerous mortgage company solicitors panel where the title to be charged incorporates obstruction of access. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each lender, for example Nationwide, Godiva Mortgages or HSBC. The content on this page is not focused on obstruction of access indemnity insurance requirements.
Need help with obstruction of access indemnity insurance from your lender?
Lloyds TSB and Virgin Money in common with the majority of banks, obligations require that where obstruction of access indemnity insurance is effected:
- your firm must spell out to the mortgagor that the borrower must comply with any conditions of the obstruction of access indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the insurance
- your practice is obliged to reveal to the insurer all relevant information which you have acquired
- the obstruction of access indemnity insurance policy must not contain conditions which you are aware would void or compromise the interests of the lender
- the level of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your practice are responsible for approving the terms of the obstruction of access policy on behalf of the mortgage company
- the obstruction of access indemnity insurance policy needs to be in favor of the bank and, if possible, in favour of the mortgagor and any future registered proprietor or bank. Where the mortgagor will not be covered by the obstruction of access indemnity insurance policy, the mortgagor needs to be informed accordingly.
- your practice must send a duplicate of the obstruction of access indemnity insurance to the borrower and explain to the borrower why the obstruction of access indemnity insurance policy was effected and that a further policy might be required if there is additional lending against the mortgaged property
- the obstruction of access indemnity insurance policy should be effected at no cost to the mortgage company
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Bradford & Bingley | Amount of loan + 15% |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| First Direct | The value of the insurance must be for at least the full value of the property |
| Godiva Mortgages | Minimum of the value of the property. |
| Harpenden Building Society | 110% of mortgage advance |
| Holmesdale Building Society | 110% |
| Lloyds | The value of the property. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Progressive BS | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
Obstruction of Access Contingency Insurance : Reflections
The extent of the terms for obstruction of access indemnity insurance are identified in the policy paperwork. Conveyancing solicitors should direct the borrower to the obstruction of access indemnity insurance policy paperwork. The intention of obstruction of access indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check any draft to ensure it is correct. The continuance of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Important features and benefits of obstruction of access indemnity insurance :
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. Obstruction of Access indemnity insurance Policies are likely to cover the following- Loss in market value due to the successful enforcement of the risks specified in the obstruction of access indemnity insurance.
- The cost of works (including professional fees) for the purpose of the development commenced, before the commencement of proceedings for the enforcement of the risks specified in the obstruction of access indemnity insurance, to the extent that such costs are rendered abortive by court decision.
- 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.
- Cover for compensation incurred in any proceedings regarding the risks specified in the obstruction of access policy, as well as legal and associated costs.
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the obstruction of access indemnity insurance.
Always 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?
Obstruction of Access Indemnity Insurance has limitations - Further considerations
Obstruction of Access 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 obstruction of access indemnity cover will not necessarily be the right solution. Content on this webpage is for general information for Regulated law firms in England and Wales on the the mortgage company solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the mortgage company indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most obstruction of access Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The content set out above is in relation to properties in England and Wales.