Indemnity Insurance of Possessory Title Lender conveyancing obligations

Birmingham Midshires and Accord, like most mortgage companies, have their own requirements when it comes to possessory title indemnity insurance. The purpose of this page to assist property law firms on the numerous bank solicitors panel where the title for the the property to be mortgaged incorporates possessory title. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each bank, be it Santander, Chelsea BS or Skipton. The content on this page is not focused on possessory title indemnity insurance requirements.

Need help with possessory title indemnity insurance from your lender?

---

Lloyds TSB and Barclays in common with many banks, obligations require that where possessory title indemnity insurance is effected:

• the possessory title indemnity insurance policy must not incorporate terms which you recognise would invalidate or compromise the interests of the bank
• the possessory title indemnity insurance policy must be effected at no expense to the lender
• your practice is obliged to disclose to the insurer all relevant information which you have gathered
• the possessory title indemnity insurance policy needs to be for the benefit of the bank and, if possible, for the benefit of the borrower and any next owner or bank. Where the mortgagor will not be protected by the possessory title indemnity insurance policy, you must advise the mortgagor of this fact.
• the minimum level of cover for the policy must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• your practice must supply a duplicate of the possessory title indemnity insurance to the mortgagor and explain to the borrower why the possessory title indemnity insurance policy was effected and that additional insurance might be mandatory if there is further borrowing against the security of the property
• you must point out to the borrower that the borrower must 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 insurance
• your practice are responsible for approving the terms of the possessory title policy on behalf of the lender

As to the level of cover for the possessory title 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:

Possessory Title Contingency Insurance : Reflections

The extent of the terms for possessory title indemnity insurance are set out in the policy paperwork. Conveyancing solicitors are obliged to direct your non-lender client to the possessory title indemnity insurance policy paperwork. Possessory Title Contingency insurance is devised to grant indemnity in respect of the risks specified in the policy schedule - so you should check the document to ensure it is in order. The continuance of this non-investment insurance contract is in perpetuity unless otherwise stated in the possessory title indemnity insurance policy. Again, please check that this is as you expected.

---

Possessory Title indemnity insurance: Important aspects and benefits:

The policy 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

• Diminution in value resulting from the successful enforcement of the risks specified in the possessory title insurance.
• 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 action in respect of the risks specified in the possessory title indemnity insurance, as well as fees of a legal nature.
• Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the possessory title indemnity 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.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company

---

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 possessory title policy will be invalidated.

---

Further considerations for possessory title indemnity insurance

Possessory Title Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that possessory title indemnity cover will not necessarily be the right solution.

---

The content set out above is in relation to properties in England and Wales.