Lender conveyancing panel requirements re Outstanding Rights of Common Indemnity Insurance
HSBC and Leeds Building Society, like most lenders, dictate their own specific instructions when it comes to outstanding rights of common indemnity insurance. This page is designed to help property law practitioners on the numerous bank conveyancing panel where the title to be charged contains outstanding rights of common. It is not a substitute for checking the CML handbook requirements for each bank, be it Bank of Scotland, Nationwide or Barnsley BS. The information on this page Is not to be read as outstanding rights of common indemnity insurance advice.
Need help with outstanding rights of common indemnity insurance from your lender?
Natwest and Skipton in common with most banks, obligations require that where outstanding rights of common indemnity insurance is to be taken out:
- your practice must supply a duplicate 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 a further policy may be required if there is additional borrowing against the mortgaged property
- the limit of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- the outstanding rights of common indemnity insurance policy needs to be in favor of the mortgage company and, if possible, for the benefit of the mortgagor and any subsequent owner or mortgagee. If the borrower will not be covered by the outstanding rights of common indemnity insurance policy, you must advise the borrower of this fact.
- the outstanding rights of common indemnity insurance policy should not incorporate conditions which you are aware would invalidate or prejudice the interests of the lender
- you must spell out to the mortgagor that the borrower must comply with any conditions of the outstanding rights of common indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the insurance
- the outstanding rights of common indemnity insurance policy should be effected without cost to the bank
- your practice is required to reveal to the insurer all relevant information which you have obtained
- you are responsible for approving the terms of the outstanding rights of common policy on behalf of the lender
| Lender | Requirement |
|---|---|
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Britannia | Cover to the full value of the property. |
| Cynergy Bank | The market value of the property. |
| 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. |
| Halifax | An amount at least equal to the mortgage advance. |
| Hampden | The open market value of the property according to the valuation report. |
| ITL Mortgages | Minimum of the value of the property. |
| JPMorgan | 110% of principal sum. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Masthaven Bank | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Mortgage Express | Amount of loan + 15% |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Perenna | The higher of the purchase price or valuation. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| Scottish Widows | The value of the property. |
| TSB | The value of the property |
| Tandem Bank | An amount at least equal to 110% of the purchase price or valuation – whichever is the greater. |
General Outstanding Rights of Common indemnity insurance points to consider
The extent of the terms for outstanding rights of common indemnity insurance are shown in the policy paperwork. Conveyancing solicitors should direct your non-lender client to the outstanding rights of common indemnity insurance policy paperwork. Outstanding Rights of Common indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check any draft to determine that it is correct. The lifetime 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.Outstanding Rights of Common indemnity 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 outstanding rights of common indemnity insurance schedule. Outstanding Rights of Common indemnity insurance Policies should be checked for the following- Cover for compensation incurred in any action concerning the risks specified in the outstanding rights of common indemnity insurance, as well as solicitors charges.
- Market value reduction resulting from the successful enforcement of the risks specified in the outstanding rights of common policy.
- The out of pocket expenses of altering or taking down 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 other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the outstanding rights of common insurance.
- Expenses for works (including professional fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the outstanding rights of common policy, to the extent that such costs are rendered abortive by court decision.
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 outstanding rights of common policy will be invalidated.
Other considerations for outstanding rights of common indemnity insurance
Outstanding Rights of Common insurance may satisfy lenders such as RBS or Barclays 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 provided 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 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 above information covers to properties in England and Wales.