Lender conveyancing panel requirements re Obstruction of Right of Way Indemnity Insurance

Coventry BS and Bank of Scotland, like most banks, set their own specific instructions when it comes to obstruction of right of way indemnity insurance. This page is designed to help property law firms on the various bank solicitors panel where the title to be charged contains obstruction of right of way. It is not a alternative for checking the CML handbook requirements for each lender, for example Godiva Mortgages, Accord or Yorkshire Bank Home Loans. The content on this page Is not to be read as obstruction of right of way indemnity insurance advice.

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

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Lloyds TSB and Chelsea BS like many mortgage companies, requirements are that where obstruction of right of way indemnity insurance is to be put on risk:

• the obstruction of right of way indemnity insurance policy must not contain conditions that you are aware would void or compromise the interests of the mortgage company
• your practice must approve the terms of the obstruction of right of way policy on behalf of the lender
• your practice must disclose to the insurer all relevant information which you have gathered
• the obstruction of right of way indemnity insurance policy should always be for the benefit of the lender and, if possible, in favour of the mortgagor and any future owner or mortgage company. If the mortgagor will not be covered by the obstruction of right of way indemnity insurance policy, you must advise the borrower of this fact.
• your practice is duty bound to point out to the mortgagor that the borrower must adhere to any conditions of the obstruction of right of way 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 send a duplicate of the obstruction of right of way indemnity insurance to the borrower and explain to the mortgagor why the obstruction of right of way indemnity insurance policy was effected and that additional insurance could be necessary if there is further borrowing against the security of the property
• the limit of indemnity must meet the requirements for the bank (See Part II Handbook requirements )
• the obstruction of right of way indemnity insurance policy must be effected at no charge to the mortgage company

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 full terms, conditions and exclusions for obstruction of right of way indemnity insurance are explained in the policy paperwork. Conveyancing solicitors should point your non-lender client to the obstruction of right of way indemnity insurance policy paperwork. The intention of obstruction of right of way indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to determine that it is as it should be. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.

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Important characteristics and benefits of obstruction of right of way Contingency 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 Right of Way indemnity insurance Policies should be checked for the following

• The out of pocket expenses of altering or demolishing 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.
• Diminution in 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 the written consent of the relevant insurer
• The cost of works (including professional fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the obstruction of right of way policy, to the extent that such costs are rendered abortive by court order.
• All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the obstruction of right of way indemnity insurance.
• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the obstruction of right of way indemnity insurance, as well as solicitors charges.

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Always check what is excluded from the obstruction of right of way insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the commencement of the policy? Are legal costs covered?

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

Obstruction of Right of Way 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 right of way indemnity cover will not necessarily be the right solution.

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