Indemnity Insurance of Possessory Title Lender conveyancing obligations
Natwest and Bank of Scotland, as with most banks, set their own specific instructions when it comes to possessory title indemnity insurance. This page sets out to enlighten property law firms on the different mortgage company approved list of panel lawyers where the title to be charged incorporates possessory title. Lawyers are advised to familiarise themselves with the CML handbook requirements for each mortgage company, be it RBS, Chelsea BS or Barclays. The information on this page Is not to be read as possessory title indemnity insurance advice.
Need help with possessory title indemnity insurance from your lender?
Yorkshire Bank Home Loans and Accord in common with many lenders, requirements are that where possessory title indemnity insurance is effected:
- your practice is duty bound to spell out to the borrower that the borrower must comply with any conditions of the possessory title indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the policy
- the possessory title indemnity insurance policy must be placed on risk without charge to the lender
- the level of indemnity must satisfy the requirements for the lender (See Part II Handbook requirements )
- your firm must supply a duplicate of the possessory title indemnity insurance to the mortgagor and explain to the mortgagor why the possessory title indemnity insurance policy was effected and that a further policy might be mandatory if there is supplemental borrowing against the mortgaged property
- the possessory title indemnity insurance policy needs to be for the benefit of the lender and, wherever possible, in favour of the mortgagor and any future owner or lender. If the mortgagor will not be protected by the possessory title indemnity insurance policy, the borrower must be advised accordingly.
- the possessory title indemnity insurance policy should not contain terms which you are aware would void or compromise the interests of the lender
- you are responsible for approving the terms of the possessory title policy on behalf of the mortgage company
- you is required to disclose to the insurer all relevant information which you have gathered
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Habito | Higher of purchase price or valuation |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Holmesdale Building Society | 110% |
| Investec | The open market value of the property according to the valuation report. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| 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. |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| Scottish Widows | The value of the property. |
| Secure Trust Bank | An amount at least equal to the market value. 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). |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| RBS - Virgin One | An amount equal to the value of the property. |
| Whistletree | The value of the property |
| Yorkshire Building Society | 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 mortgagee. |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
General Possessory Title indemnity insurance points to consider
The extent of the terms for possessory title indemnity insurance are shown in the policy document. Conveyancing Practitioners are obliged to direct the borrower to the possessory title indemnity insurance policy itself. The intention of possessory title indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the possessory title indemnity insurance policy. Adequacy in this regard should be checked.Possessory Title Contingency insurance: Important features and benefits:
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the possessory title indemnity insurance schedule. Possessory Title indemnity insurance Cover normally includes- The out of pocket expenses of altering or destroying 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 insurer
- Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, before the commencement of proceedings for the enforcement of the risks specified in the possessory title policy, to the extent that such costs are rendered abortive by court decision.
- Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the possessory title indemnity insurance.
- Cover for compensation incurred in any proceedings regarding the risks specified in the possessory title indemnity insurance, as well as solicitors charges.
- Market value reduction resulting from the successful enforcement of the risks specified in the possessory title indemnity insurance.
Don't forget to consider what is not included in the possessory title indemnity insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?
Supplemental considerations for possessory title indemnity insurance
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from possessory title insurance may be adequate for your client. Content on this webpage is for general information for conveyancers and solicitors 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 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 possessory title 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.