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

Barnsley BS and Birmingham Midshires, as with many banks, dictate their own specific instructions when it comes to obstruction of right of way indemnity insurance. The purpose of this page to assist conveyancing lawyers on the different mortgage company conveyancing panel where the title to be charged contains obstruction of right of way. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, for example Yorkshire Building Society, RBS or Godiva Mortgages. The content on this page is not focused on obstruction of right of way indemnity insurance requirements.

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

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Santander and Lloyds TSB like the majority of lenders, obligations require that where obstruction of right of way indemnity insurance is to be put on risk:

• your firm must send a duplicate of the obstruction of right of way indemnity insurance to the borrower and explain to the mortgagor why the obstruction of right of way 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 bank (See Part II Handbook requirements )
• the obstruction of right of way indemnity insurance policy should always be in favor of the lender and, if possible, for the benefit of the mortgagor and any next owner or bank. If the mortgagor will not be covered by the obstruction of right of way indemnity insurance policy, the borrower must be advised accordingly.
• your practice is obliged to reveal to the insurer all relevant information which you have acquired
• your practice are responsible for approving the terms of the obstruction of right of way policy on behalf of the lender
• your firm is duty bound to point out to the mortgagor that the borrower is obliged to adhere to 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 respect of the insurance
• the obstruction of right of way indemnity insurance policy should be effected at no expense to the mortgage company
• the obstruction of right of way indemnity insurance policy must not incorporate terms that you are aware would invalidate or prejudice the interests of the lender

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 lenders:

Obstruction of Right of Way Contingency Insurance : Reflections

The extent of the terms for obstruction of right of way indemnity insurance are identified in the policy paperwork. Property lawyers are obliged to direct your non-lender client to the obstruction of right of way indemnity insurance policy paperwork. The intention of obstruction of right of way indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so it is essential check the schedule to ensure it is correct. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.

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Obstruction of Right of Way Contingency insurance: Significant aspects and benefits:

Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Obstruction of Right of Way indemnity insurance Cover normally includes

• All sums paid with consent in writing from the insurance company to free the land from the risks specified in the obstruction of right of way indemnity insurance.
• Diminution in value due to the successful enforcement of 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 destroying 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.
• The cost of works (including professional fees) for the purpose of the development started, 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 decision.
• Liability for damages or compensation incurred in any action regarding the risks specified in the obstruction of right of way insurance, including solicitors charges.

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Always consider what is not included in the obstruction of right of way policy e.g. does the policy cover any residence 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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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 covers to properties in England and Wales.