Indemnity Insurance of Possessory Title Mortgage Company conveyancing instructions
Barclays and Virgin Money, in common with many lenders, have their own specific instructions when it comes to possessory title indemnity insurance. The content herein aims to help conveyancing firms on the different lender conveyancing panel where the title to be charged contains possessory title. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each lender, for example Yorkshire Bank Home Loans, Birmingham Midshires or Natwest. The content on this page is not focused on possessory title indemnity insurance requirements.
Need help with possessory title indemnity insurance from your lender?
HSBC and Leeds Building Society in common with the majority of banks, requirements are that where possessory title indemnity insurance is to be taken out:
- your practice must send a copy of the possessory title indemnity insurance to the borrower and explain to the mortgagor why the possessory title indemnity insurance policy was effected and that a further policy could be required if there is further borrowing against the mortgaged property
- you must explain to the mortgagor that the borrower will need to comply with any conditions of the possessory title indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the policy
- the possessory title indemnity insurance policy should not contain terms that you know would invalidate or prejudice the interests of the mortgage company
- your practice are responsible for approving the terms of the possessory title policy on behalf of the lender
- the possessory title indemnity insurance policy needs to be for the benefit of the mortgage company and, if possible, for the benefit of the mortgagor and any future registered proprietor or lender. Where the borrower will not be covered by the possessory title indemnity insurance policy, you must advise the mortgagor of this fact.
- the possessory title indemnity insurance policy should be effected without cost to the lender
- you is obliged to reveal to the insurer all relevant information which you have obtained
- the level of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| 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. |
| Barclays plc | Higher of purchase price or valuation |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Cynergy Bank | The market value of the property. |
| Hodge | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| Hodge Equity Release | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| NRAM Ltd | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| RBS- First Active | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Topaz Finance | 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. |
| Ulster Bank | An amount equal to the value of the property. |
Possessory Title Contingency Insurance : Reflections
The full terms, conditions and exclusions for possessory title indemnity insurance are explained in the policy document. Conveyancing Practitioners are obliged to point the borrower to the possessory title indemnity insurance policy paperwork. The intention of possessory title indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so you should check the document to determine that it is in order. The lifetime of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Possessory Title Contingency insurance: Important aspects and benefits:
Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Possessory Title indemnity insurance Policies should be checked for the following- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- All sums paid with the written consent of the insurance company to free the land from the risks specified in the possessory title policy.
- Loss in market value resulting from the successful enforcement of the risks specified in the possessory title policy.
- The cost 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.
- Expenses for works (including architects’ and surveyors’ 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 indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Cover for compensation incurred in any proceedings regarding the risks specified in the possessory title indemnity insurance, including fees of a legal nature.
Always consider what is excluded from the possessory title indemnity insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the commencement of the policy? Does it cover legal costs?
Possessory Title Indemnity Insurance has limitations - Further considerations
Possessory Title insurance may satisfy lenders such as Lloyds TSB or Nationwide 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 conveyancers and solicitors in England and Wales on the the lender conveyancing 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.