Indemnity Insurance of Rights to Light Mortgage Company conveyancing obligations
Coventry BS and Halifax, in common with many mortgage companies, have their own specific instructions when it comes to rights to light indemnity insurance. The purpose of this page to assist conveyancing solicitors on the numerous mortgage company conveyancing panel where the title for the the property to be mortgaged contains rights to light. It is not a substitute for checking the CML handbook requirements for each bank, for example RBS, Skipton or Yorkshire Bank Home Loans. The content on this page is not focused on rights to light indemnity insurance requirements.
Need help with rights to light indemnity insurance from your lender?
Chelsea BS and Bank of Scotland as with most lenders, instructions are such that where rights to light indemnity insurance is effected:
- the rights to light indemnity insurance policy should be effected at no expense to the mortgage company
- the level of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your firm must reveal to the insurer all relevant information which you have obtained
- your firm are responsible for approving the terms of the rights to light policy on behalf of the bank
- the rights to light indemnity insurance policy should not contain terms which you are aware would invalidate or compromise the interests of the lender
- the rights to light indemnity insurance policy needs to be for the benefit of the lender and, wherever possible, in favour of the borrower and any subsequent registered proprietor or mortgagee. Where the mortgagor will not be covered by the rights to light indemnity insurance policy, the mortgagor needs to be informed accordingly.
- your practice is duty bound to explain to the borrower that the borrower must comply with any conditions of the rights to light indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the insurance
- your practice must supply a copy of the rights to light indemnity insurance to the mortgagor and explain to the borrower why the rights to light indemnity insurance policy was effected and that a further policy could be mandatory if there is additional borrowing against the security of the property
| Lender | Requirement |
|---|---|
| Accord Buy to Let | 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. |
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| Family Building Society | An amount at least equal to the mortgage advance. |
| First Direct | The value of the insurance must be for at least the full value of the property |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Hinckley and Rugby | The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest. |
| 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. |
| ITL Mortgages | Minimum of the value of the property. |
| JPMorgan | 110% of principal sum. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| 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. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
Rights to Light Contingency Insurance : Reflections
The full terms, conditions and exclusions for rights to light indemnity insurance are identified in the policy document. Conveyancing Practitioners are obliged to point your non-lender client to the rights to light indemnity insurance policy paperwork. Rights to Light indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to determine that it is correct. The continuance of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.Significant characteristics and benefits of rights to light Contingency insurance :
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. Rights to Light indemnity insurance Policies should be checked for the following- 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 commenced, before the commencement of proceedings for the enforcement of the risks specified in the rights to light 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 property from the risks specified in the rights to light policy.
- Cover for compensation incurred in any action concerning the risks specified in the rights to light policy, as well as fees of a legal nature.
- Loss in market value resulting from the successful enforcement of the risks specified in the rights to light policy.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
As with any insurance policy, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the rights to light policy will be invalidated.
Additional considerations for rights to light indemnity insurance
Rights to Light Indemnity insurance isn’t a solution to all of the relevant problems. 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 bank 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 rights to light 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.