Mortgage Company conveyancing panel conditions re Obstruction of Right of Way Indemnity Insurance

Lloyds TSB and RBS, as with the majority of mortgage companies, set their own requirements when it comes to obstruction of right of way indemnity insurance. The purpose of this page to assist property law solicitors on the various bank approved list of panel lawyers where the title for the the property to be mortgaged incorporates obstruction of right of way. Solicitors should still check the CML handbook requirements for each bank, whether it be Natwest, Halifax or Accord. The information 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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Birmingham Midshires and Bank of Scotland like the majority of lenders, instructions are such that where obstruction of right of way indemnity insurance is to be put on risk:

• your practice must supply a copy 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 a further policy may be mandatory if there is supplemental lending against the security of the property
• your practice must approve the terms of the obstruction of right of way policy on behalf of the lender
• your practice must point out to the borrower that the borrower is obliged to comply with any conditions of the obstruction of right of way indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the insurance
• the obstruction of right of way indemnity insurance policy should not contain conditions which you recognise would invalidate or prejudice the interests of the mortgage company
• the obstruction of right of way indemnity insurance policy needs to be in favor of the lender 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 obstruction of right of way indemnity insurance policy, the borrower must be informed accordingly.
• the limit of indemnity must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
• the obstruction of right of way indemnity insurance policy should be effected at no expense to the bank
• you is required to disclose to the insurer all relevant information which you have obtained

As to the level 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 mortgage companies:

General Obstruction of Right of Way indemnity insurance points to consider

The full terms, conditions and exclusions for obstruction of right of way indemnity insurance are explained in the policy document. Conveyancing Practitioners should direct the borrower to the obstruction of right of way indemnity insurance policy itself. Obstruction of Right of Way Contingency insurance is designed to afford indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to ensure it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the obstruction of right of way indemnity insurance policy. Again, please check that this is as you expected.

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Obstruction of Right of Way indemnity insurance: Significant characteristics and benefits:

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 Policies should be checked for the following

• 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 indemnity insurance.
• Market value reduction resulting from the successful enforcement of the risks specified in the obstruction of right of way indemnity insurance.
• 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.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
• The cost of works (including professional 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 obstruction of right of way indemnity insurance, to the extent that such costs are rendered abortive by court decision.
• Cover for compensation incurred in any action concerning the risks specified in the obstruction of right of way insurance, as well as incurred costs and expenses.

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Don't forget to check what is excluded from the obstruction of right of way indemnity insurance e.g. does the policy cover any residence that has been altered within the year prior to the commencement of the policy? Are legal costs covered?

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

Obstruction of Right of Way 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 obstruction of right of way indemnity cover will not necessarily be the right solution.

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