Bank conveyancing panel conditions re Obstruction of Right of Way Indemnity Insurance

Leeds Building Society and Skipton, like the majority of mortgage companies, dictate their own requirements when it comes to obstruction of right of way indemnity insurance. The content herein aims to help property law firms on the different bank conveyancing panel where the title to be charged includes obstruction of right of way. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, be it Coventry BS, Virgin Money or Bank of Scotland. The content on this page Is not to be read as obstruction of right of way indemnity insurance advice.

Need help with obstruction of right of way indemnity insurance from your lender?

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Accord and Yorkshire Bank Home Loans as with most lenders, requirements are that where obstruction of right of way indemnity insurance is to be put on risk:

• the obstruction of right of way indemnity insurance policy should not contain terms that you are aware would invalidate or prejudice the interests of the lender
• your firm must send a duplicate of the obstruction of right of way indemnity insurance to the borrower and explain to the borrower why the obstruction of right of way indemnity insurance policy was effected and that additional insurance may be required if there is additional borrowing against the security of the property
• the obstruction of right of way indemnity insurance policy must be for the benefit of the mortgage company and, wherever possible, in favour of the borrower and any subsequent owner or mortgagee. If the borrower will not be protected by the obstruction of right of way indemnity insurance policy, you must advise the mortgagor of this fact.
• the obstruction of right of way indemnity insurance policy should be placed on risk at no expense to the bank
• your firm is duty bound to point out to the borrower that the borrower must adhere to any conditions of the obstruction of right of way indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the insurance
• your firm are responsible for approving the terms of the obstruction of right of way policy on behalf of the lender
• your practice must reveal to the insurer all relevant information which you have acquired
• the minimum level of cover for the policy must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )

Regarding the extent of cover for the obstruction of right of way 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 lenders:

Non lender-specific considerations

The full terms, conditions and exclusions for obstruction of right of way indemnity insurance are identified in the policy document. Conveyancing Practitioners are obliged to direct the borrower to the obstruction of right of way indemnity insurance policy document. The intention of obstruction of right of way indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to ensure it is correct. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the obstruction of right of way indemnity insurance policy. It is well worth checking that the time frame is correct.

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Significant aspects and benefits of obstruction of right of way indemnity 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. Obstruction of Right of Way indemnity insurance Cover normally includes

• The cost of works (including professional fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the obstruction of right of way policy, to the extent that such costs are rendered abortive by court order.
• Loss in market value resulting from the successful enforcement of the risks specified in the obstruction of right of way indemnity insurance.
• Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the obstruction of right of way insurance.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• 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.
• Cover for compensation incurred in any action in respect of the risks specified in the obstruction of right of way policy, including solicitors charges.

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You also need to be sure that the answers on the application form are accurate. Regardless of how remote a claim on the mortgage company insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being met.

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Obstruction of Right of Way Indemnity Insurance has limitations - Further considerations

Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from obstruction of right of way insurance may be adequate for your client.

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