Indemnity Insurance of Obstruction of Right of Way Bank conveyancing obligations

Barclays and Nationwide, as with most banks, set their own requirements when it comes to obstruction of right of way indemnity insurance. This page sets out to enlighten conveyancing firms on the numerous bank solicitors panel where the title to be charged includes obstruction of right of way. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Barnsley BS, Accord or Birmingham Midshires. 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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Natwest and Godiva Mortgages in common with many mortgage companies, instructions are such that where obstruction of right of way indemnity insurance is to be put on risk:

• the obstruction of right of way indemnity insurance policy should not contain conditions which you recognise would invalidate or compromise the interests of the lender
• you must reveal to the insurer all relevant information which you have obtained
• your practice must approve the terms of the obstruction of right of way policy on behalf of the mortgage company
• the limit of indemnity must meet the requirements for the lender (See Part II Handbook requirements )
• your practice must supply a copy 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 a further policy may be necessary if there is additional borrowing against the mortgaged property
• the obstruction of right of way indemnity insurance policy should be placed on risk at no expense to the bank
• your firm must spell out to the mortgagor that the borrower must comply with 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 policy
• the obstruction of right of way indemnity insurance policy needs to be in favor of the bank and, if possible, for the benefit of the borrower and any subsequent registered proprietor or mortgage company. Where the mortgagor will not be covered by the obstruction of right of way indemnity insurance policy, the borrower needs to be advised accordingly.

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 Paragraph 9.2 of the CML handbook PII requirements for lenders:

Non lender-specific considerations

The full terms, conditions and exclusions for obstruction of right of way indemnity insurance are shown in the policy document. Conveyancing solicitors are obliged to point the borrower to the obstruction of right of way indemnity insurance policy document. Obstruction of Right of Way indemnity insurance is devised to afford indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to ensure it is in order. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the obstruction of right of way indemnity insurance policy. Again, please check that this is as you expected.

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Obstruction of Right of Way indemnity insurance: Significant aspects 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 Policies are likely to cover 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.
• Liability for damages or compensation incurred in any proceedings regarding the risks specified in the obstruction of right of way indemnity insurance, as well as 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 sums paid with the written consent of the insurance company to free the land from the risks specified in the obstruction of right of way policy.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development commenced, before the commencement of 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 decision.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer

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As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the obstruction of right of way policy will be invalidated.

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Further considerations for obstruction of right of way indemnity insurance

Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from obstruction of right of way insurance may be adequate for your client.

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