Obstruction of Right of Way Indemnity Insurance Mortgage Company conveyancing requirements

Halifax and Lloyds TSB, in common with the majority of mortgage companies, set their own requirements when it comes to obstruction of right of way indemnity insurance. The purpose of this page to assist property law lawyers on the numerous mortgage company solicitors panel where the title to be charged contains obstruction of right of way. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each bank, be it Yorkshire Building Society, Coventry BS or Accord. The content on this page is not focused on obstruction of right of way indemnity insurance requirements.

Need help with obstruction of right of way indemnity insurance from your lender?

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Barclays and Barnsley BS as with the majority of mortgage companies, instructions are such that where obstruction of right of way indemnity insurance is to be put on risk:

• your practice must send a duplicate of the obstruction of right of way indemnity insurance to the mortgagor and explain to the borrower why the obstruction of right of way indemnity insurance policy was effected and that additional insurance may be required if there is supplemental lending against the mortgaged property
• the limit of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
• your practice must approve the terms of the obstruction of right of way policy on behalf of the lender
• the obstruction of right of way indemnity insurance policy must be in favor of the lender and, if possible, for the benefit of the borrower and any subsequent owner or mortgage company. Where the mortgagor will not be protected by the obstruction of right of way indemnity insurance policy, the borrower needs to be informed accordingly.
• your firm is duty bound to explain to the mortgagor that the borrower is obliged to adhere to any conditions of the obstruction of right of way indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the policy
• the obstruction of right of way indemnity insurance policy should not incorporate terms which you know would void or compromise the interests of the bank
• your practice must reveal to the insurer all relevant information which you have acquired
• the obstruction of right of way indemnity insurance policy should be effected without charge to the bank

Regarding the extent of cover for the obstruction of right of way 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:

General Obstruction of Right of Way indemnity insurance points to consider

The extent of the terms for obstruction of right of way indemnity insurance are set out in the policy document. Conveyancing Practitioners are obliged to direct your non-lender client to the obstruction of right of way indemnity insurance policy itself. The intention of obstruction of right of way indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so you should check the document to determine that it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.

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Obstruction of Right of Way Contingency insurance: Significant features and benefits:

The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the obstruction of right of way indemnity insurance schedule. Obstruction of Right of Way indemnity insurance Cover normally includes

• The cost 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 sums paid with consent in writing from the insurance company to liberate the property from the risks specified in the obstruction of right of way indemnity insurance.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the obstruction of right of way insurance, to the extent that such costs are rendered abortive by court order.
• Liability for damages or compensation incurred in any action in respect of the risks specified in the obstruction of right of way policy, including solicitors charges.
• Loss in market value due to the successful enforcement of the risks specified in the obstruction of right of way indemnity insurance.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company

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Always consider what is not included in the obstruction of right of way policy e.g. does the policy cover any property that has been altered within the 12 months prior to the policy being put on risk? Does it cover legal costs?

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Obstruction of Right of Way Indemnity Insurance has limitations - Other considerations

Obstruction of Right of Way insurance may satisfy lenders such as Nationwide 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 above information covers to properties in England and Wales.