Lender conveyancing panel requirements re Obstruction of Right of Way Indemnity Insurance

Yorkshire Bank Home Loans and Halifax, like most mortgage companies, set their own requirements when it comes to obstruction of right of way indemnity insurance. This page is designed to help domestic conveyancing solicitors on the numerous mortgage company conveyancing panel where the title for the the property to be mortgaged includes obstruction of right of way. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, whether it be Nationwide, Godiva Mortgages or Birmingham Midshires. 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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Barclays and Lloyds TSB in common with the majority of lenders, obligations require 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 incorporate conditions that you are aware would invalidate or prejudice the interests of the mortgage company
• the minimum level of cover for the policy must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• your practice must explain to the borrower that the borrower will need to 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 practice is required to reveal to the insurer all relevant information which you have gathered
• your firm must supply a copy of the obstruction of right of way indemnity insurance to the mortgagor and explain to the borrower why the obstruction of right of way indemnity insurance policy was effected and that additional insurance could be necessary if there is additional borrowing against the mortgaged property
• the obstruction of right of way indemnity insurance policy must be in favor of the mortgage company and, wherever possible, in favour of the mortgagor and any future owner or mortgagee. Where the mortgagor will not be covered by the obstruction of right of way indemnity insurance policy, the borrower must be advised accordingly.
• your firm must approve the terms of the obstruction of right of way policy on behalf of the lender
• the obstruction of right of way indemnity insurance policy should be effected without charge to the mortgage company

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 Part 2 requirements for lenders:

General Obstruction of Right of Way indemnity insurance points to consider

The extent of the terms for obstruction of right of way indemnity insurance are identified in the policy document. Property lawyers should 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 grant indemnity in respect of the risks set out in the policy schedule - so you should check the document to determine that it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.

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

The insurance 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 insurance company
• Expenses for 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.
• 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 insurance.
• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the obstruction of right of way insurance, as well as legal and associated costs.
• 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.
• Loss in market value due to the successful enforcement of the risks specified in the obstruction of right of way policy.

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You also need to be sure that the answers on the application form are correct. However remote the likelihood of a claim on the bank insurance policy might be you can rest assured that the insurer will check the details on any proposal form very carefully prior to any claim being met.

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Obstruction of Right of Way Indemnity Insurance has limitations - Other 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.