Outstanding Rights of Common Indemnity Insurance Lender conveyancing requirements
Yorkshire Bank Home Loans and RBS, in common with many mortgage companies, dictate their own requirements when it comes to outstanding rights of common indemnity insurance. The purpose of this page to assist conveyancing lawyers on the different mortgage company conveyancing panel where the title to be charged includes outstanding rights of common. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each bank, for example HSBC, Natwest or Lloyds TSB. The content on this page is not focused on outstanding rights of common indemnity insurance requirements.
Need help with outstanding rights of common indemnity insurance from your lender?
Virgin Money and Skipton in common with most banks, instructions are such that where outstanding rights of common indemnity insurance is effected:
- your practice is duty bound to point out to the borrower that the borrower must comply with any conditions of the outstanding rights of common indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the policy
- the outstanding rights of common indemnity insurance policy should be effected at no charge to the mortgage company
- your practice is obliged to disclose to the insurer all relevant information which you have obtained
- the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- you must supply a copy of the outstanding rights of common indemnity insurance to the borrower and explain to the borrower why the outstanding rights of common indemnity insurance policy was effected and that a further policy could be mandatory if there is additional borrowing against the security of the property
- your practice are responsible for approving the terms of the outstanding rights of common policy on behalf of the lender
- the outstanding rights of common indemnity insurance policy must be in favor of the bank and, if possible, in favour of the mortgagor and any subsequent owner or bank. If the mortgagor will not be protected by the outstanding rights of common indemnity insurance policy, the mortgagor needs to be advised accordingly.
- the outstanding rights of common indemnity insurance policy must not incorporate conditions which you recognise would invalidate or prejudice the interests of the bank
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Britannia | Cover to the full value of the property. |
| Clydesdale Bank | Open market value of property. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Habito | Higher of purchase price or valuation |
| Investec | The open market value of the property according to the valuation report. |
| Lloyds TSB Scotland | The value of the property |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Scottish Widows | The value of the property. |
| TSB | The value of the property |
| RBS - Direct Line | An amount equal to the value of the property. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
General Outstanding Rights of Common indemnity insurance points to consider
The extent of the terms for outstanding rights of common indemnity insurance are identified in the policy document. Conveyancing Practitioners are obliged to direct the borrower to the outstanding rights of common indemnity insurance policy paperwork. Outstanding Rights of Common indemnity insurance is designed to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to determine that 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.Significant features and benefits of outstanding rights of common indemnity insurance :
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. Outstanding Rights of Common indemnity insurance Cover normally includes- Diminution in value resulting from the successful enforcement of the risks specified in the outstanding rights of common insurance.
- Reimbursement for compensation incurred in any action concerning the risks specified in the outstanding rights of common insurance, as well as solicitors charges.
- 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 outstanding rights of common policy, to the extent that such costs are rendered abortive by court order.
- All sums paid with the written consent of the insurance company to free the land from the risks specified in the outstanding rights of common policy.
- 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.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the outstanding rights of common policy will be invalidated.
Outstanding Rights of Common Indemnity Insurance has limitations - Additional considerations
Outstanding Rights of Common 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 outstanding rights of common indemnity cover will not necessarily be the right solution. Content on this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most outstanding rights of common Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The above information covers to properties in England and Wales.