Adverse Possession Indemnity Insurance Lender conveyancing requirements

Barnsley BS and Chelsea BS, in common with the majority of banks, have their own specific instructions when it comes to adverse possession indemnity insurance. The content herein aims to help domestic conveyancing solicitors on the different lender approved list of panel lawyers where the title to be charged contains adverse possession. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, whether it be RBS, Accord or Lloyds TSB. The information on this page Is not to be read as adverse possession indemnity insurance advice.

Need help with adverse possession indemnity insurance from your lender?

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Yorkshire Building Society and Barclays as with most mortgage companies, obligations require that where adverse possession indemnity insurance is to be put on risk:

• the adverse possession indemnity insurance policy should always be for the benefit of the lender and, wherever possible, for the benefit of the mortgagor and any next registered proprietor or mortgagee. Where the borrower will not be protected by the adverse possession indemnity insurance policy, the borrower should be informed accordingly.
• the adverse possession indemnity insurance policy must be placed on risk without expense to the lender
• you must supply a duplicate of the adverse possession indemnity insurance to the borrower and explain to the borrower why the adverse possession indemnity insurance policy was effected and that a further policy might be necessary if there is further borrowing against the mortgaged property
• the level of indemnity must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
• the adverse possession indemnity insurance policy should not incorporate conditions that you recognise would invalidate or prejudice the interests of the mortgage company
• your firm must approve the terms of the adverse possession policy on behalf of the mortgage company
• you is required to reveal to the insurer all relevant information which you have obtained
• your firm is duty bound to explain to the borrower that the borrower is obliged to adhere to any conditions of the adverse possession indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the insurance

Regarding the extent of cover for the adverse possession 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 banks:

Adverse Possession Contingency Insurance : Reflections

The extent of the terms for adverse possession indemnity insurance are set out in the policy document. Property lawyers are obliged to point your non-lender client to the adverse possession indemnity insurance policy document. Adverse Possession Contingency insurance is designed to afford indemnity in respect of the risks set out in the policy schedule - so it is essential check the document to ensure it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the adverse possession indemnity insurance policy. Again, please check that this is as you expected.

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Adverse Possession 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 adverse possession indemnity insurance schedule. Adverse Possession indemnity insurance Cover normally includes

• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
• All sums paid with consent in writing from the insurance company to free the property from the risks specified in the adverse possession indemnity insurance.
• Liability for damages or compensation incurred in any proceedings concerning the risks specified in the adverse possession policy, including incurred costs and expenses.
• Diminution in value due to the successful enforcement of the risks specified in the adverse possession indemnity insurance.
• The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the adverse possession policy, to the extent that such costs are rendered abortive by court order.
• The out of pocket expenses 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.

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Don't forget to check what is excluded from the adverse possession insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the policy being put on risk? Does it cover legal costs?

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Further considerations for adverse possession indemnity insurance

Adverse Possession 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 adverse possession indemnity cover will not necessarily be the answer.

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