Indemnity Insurance of Outstanding Rights of Common Mortgage Company conveyancing requirements

Yorkshire Building Society and Halifax, as with many banks, have their own specific instructions when it comes to outstanding rights of common indemnity insurance. This page is designed to help conveyancing practitioners on the different mortgage company approved list of panel lawyers where the title for the the property to be mortgaged contains outstanding rights of common. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each lender, for example Santander, Accord or Leeds Building Society. The content 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?

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Skipton and Barnsley BS as with most banks, requirements are that where outstanding rights of common indemnity insurance is to be taken out:

• the outstanding rights of common indemnity insurance policy must be for the benefit of the bank and, wherever possible, for the benefit of the borrower and any next owner or mortgage company. If the mortgagor will not be protected by the outstanding rights of common indemnity insurance policy, you must advise the borrower of this fact.
• you must point out to the mortgagor that the borrower will need to comply with 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 insurance
• the limit of indemnity must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
• the outstanding rights of common indemnity insurance policy must be effected at no charge to the bank
• your practice must approve the terms of the outstanding rights of common policy on behalf of the lender
• you is required to reveal to the insurer all relevant information which you have gathered
• your practice must provide a copy of the outstanding rights of common indemnity insurance to the borrower and explain to the borrower why the outstanding rights of common indemnity insurance policy was effected and that additional insurance may be necessary if there is additional borrowing against the security of the property
• the outstanding rights of common indemnity insurance policy should not contain terms which you know would void or compromise the interests of the lender

Regarding the extent of cover for the outstanding rights of common 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 mortgage companies:

General Outstanding Rights of Common indemnity insurance points to consider

The extent of the terms for outstanding rights of common indemnity insurance are explained in the policy document. Conveyancing Practitioners are obliged to direct your non-lender client to the outstanding rights of common indemnity insurance policy itself. The intention of outstanding rights of common indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check the schedule to ensure it is correct. The continuance of this non-investment insurance contract is in perpetuity unless otherwise stated in the outstanding rights of common indemnity insurance policy. Again, please check that this is as you expected.

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Outstanding Rights of Common Contingency insurance: Important characteristics 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 Policies are likely to cover the following

• Cover for compensation incurred in any action in respect of the risks specified in the outstanding rights of common insurance, including fees of a legal nature.
• Loss in market value resulting from the successful enforcement of the risks specified in the outstanding rights of common insurance.
• The cost 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.
• Expenses for works (including professional fees) for the purpose of the development started, 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.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• All sums paid with consent in writing from the insurance company to free the land from the risks specified in the outstanding rights of common policy.

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Don't forget to consider what is not included in the outstanding rights of common policy 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?

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Outstanding Rights of Common Indemnity Insurance has limitations - Supplemental considerations

Outstanding Rights of Common insurance may satisfy lenders such as RBS 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.

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The above information covers to properties in England and Wales.