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

Virgin Money and Skipton, like the majority of banks, dictate their own requirements when it comes to obstruction of right of way indemnity insurance. The purpose of this page to assist property law firms on the different lender solicitors panel where the title for the the property to be mortgaged contains obstruction of right of way. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, whether it be Bank of Scotland, Halifax or Barnsley BS. 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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Coventry BS and RBS as with many mortgage companies, obligations require that where obstruction of right of way indemnity insurance is to be taken out:

• the obstruction of right of way indemnity insurance policy must not contain conditions which you know would invalidate or compromise the interests of the bank
• your firm must point out to the mortgagor that the borrower must comply with any conditions of the obstruction of right of way indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the policy
• your firm is obliged to disclose to the insurer all relevant information which you have gathered
• the obstruction of right of way indemnity insurance policy needs to be for the benefit of the lender and, wherever possible, for the benefit of the mortgagor and any future registered proprietor 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 without cost to the bank
• your firm must approve the terms of the obstruction of right of way policy on behalf of the lender
• you must supply a copy 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 mandatory if there is supplemental borrowing against the mortgaged property
• the limit of indemnity must satisfy the requirements for the mortgage company (See Part II Handbook requirements )

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 Section 9.2 of the CML handbook PII requirements for lenders:

Obstruction of Right of Way Contingency Insurance : Reflections

The full terms, conditions and exclusions for obstruction of right of way indemnity insurance are shown in the policy paperwork. Property lawyers should direct the borrower to the obstruction of right of way indemnity insurance policy paperwork. Obstruction of Right of Way indemnity insurance is designed to afford indemnity in respect of the risks specified in the policy schedule - so you should check any draft to determine that it is in order. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. 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 :

The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the obstruction of right of way indemnity insurance schedule. Obstruction of Right of Way indemnity insurance Policies are likely to cover the following

• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• Diminution in value due to the successful enforcement of the risks specified in the obstruction of right of way indemnity insurance.
• Cover for compensation incurred in any proceedings concerning the risks specified in the obstruction of right of way policy, including incurred costs and expenses.
• All sums paid with the written consent of the insurance company to free the property from the risks specified in the obstruction of right of way insurance.
• The out of pocket expenses 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.
• The cost of works (including professional fees) for the purpose of the development commenced, before the commencement of 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.

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Don't forget to consider what is excluded from 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? Are legal costs covered?

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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.