Lender conveyancing panel conditions re Outstanding Rights of Common Indemnity Insurance
Yorkshire Building Society and Lloyds TSB, as with most banks, dictate their own specific instructions when it comes to outstanding rights of common indemnity insurance. The content herein aims to help residential conveyancing solicitors on the various mortgage company solicitors panel where the title for the the property to be mortgaged incorporates outstanding rights of common. Solicitors should still check the CML handbook requirements for each mortgage company, whether it be Chelsea BS, Coventry BS or Barnsley BS. The information on this page is not focused on outstanding rights of common indemnity insurance requirements.
Need help with outstanding rights of common indemnity insurance from your lender?
Barclays and RBS as with the majority of mortgage companies, obligations require that where outstanding rights of common indemnity insurance is to be put on risk:
- your practice must disclose to the insurer all relevant information which you have acquired
- the outstanding rights of common indemnity insurance policy must not contain terms that you are aware would void or prejudice the interests of the bank
- you must supply a copy of the outstanding rights of common indemnity insurance to the mortgagor and explain to the mortgagor why the outstanding rights of common indemnity insurance policy was effected and that additional insurance could be mandatory if there is additional borrowing against the security of the property
- your firm must point out to the borrower that the borrower must adhere to any conditions of the outstanding rights of common indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the policy
- you must approve the terms of the outstanding rights of common policy on behalf of the mortgage company
- the outstanding rights of common indemnity insurance policy must be effected without cost to the bank
- the outstanding rights of common indemnity insurance policy should always be for the benefit of the mortgage company and, wherever possible, in favour of the mortgagor and any future owner or lender. If the borrower will not be protected by the outstanding rights of common indemnity insurance policy, you must advise the mortgagor of this fact.
- the limit of indemnity must satisfy the requirements for the bank (See Part II Handbook requirements )
| Lender | Requirement |
|---|---|
| April Mortgages | An amount at least equal to the mortgage advance. |
| Birmingham Bank | Please contact Head of Operations to discuss (Gareth Allen) |
| Bradford & Bingley | Amount of loan + 15% |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| ITL Mortgages | Minimum of the value of the property. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Legal & General Home Finance | The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Molo Finance Buy to Let | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgages. |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Saffron Building Society | Higher of purchase price or valuation. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Whistletree | The value of the property |
| Yorkshire Bank | Open market value of property. |
General Outstanding Rights of Common indemnity insurance points to consider
The full terms, conditions and exclusions for outstanding rights of common indemnity insurance are shown in the policy paperwork. Property lawyers should point the borrower to the outstanding rights of common indemnity insurance policy document. Outstanding Rights of Common Contingency insurance is designed to afford indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to ensure it is as it should be. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the outstanding rights of common indemnity insurance policy. Adequacy in this regard should be checked.Outstanding Rights of Common indemnity insurance: Important features and benefits:
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. Outstanding Rights of Common indemnity insurance Cover normally includes- 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 outstanding rights of common policy.
- All sums paid with the written consent of the insurance company to free the property from the risks specified in the outstanding rights of common policy.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Liability for damages or compensation incurred in any action regarding the risks specified in the outstanding rights of common insurance, including incurred costs and expenses.
- 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 outstanding rights of common insurance, to the extent that such costs are rendered abortive by court order.
Always consider what is not included in the outstanding rights of common insurance e.g. does the policy cover any property that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?
Outstanding Rights of Common Indemnity Insurance has limitations - Other considerations
Outstanding Rights of Common insurance may satisfy lenders such as Halifax or Virgin Money 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. Information contained within this webpage is for general information for Regulated law firms in England and Wales on the the lender approved panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender 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 outstanding rights of common 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.