Outstanding Rights of Common Indemnity Insurance Lender conveyancing requirements
Halifax and HSBC, as with the majority of lenders, set their own requirements when it comes to outstanding rights of common indemnity insurance. This page sets out to enlighten property law practitioners on the various mortgage company conveyancing panel where the title to be charged incorporates outstanding rights of common. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Natwest, Chelsea BS or Skipton. 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 Bank of Scotland in common with many mortgage companies, obligations require that where outstanding rights of common indemnity insurance is effected:
- the outstanding rights of common indemnity insurance policy should not contain terms which you are aware would invalidate or compromise the interests of the mortgage company
- the outstanding rights of common indemnity insurance policy must be placed on risk at no cost to the mortgage company
- the limit of indemnity must satisfy the requirements for the bank (See Part II Handbook requirements )
- you must approve the terms of the outstanding rights of common policy on behalf of the bank
- the outstanding rights of common indemnity insurance policy should always be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any subsequent owner or bank. Where the borrower will not be covered by the outstanding rights of common indemnity insurance policy, you must advise the mortgagor of this fact.
- you must provide a duplicate of the outstanding rights of common indemnity insurance to the mortgagor and explain to the mortgagor why the outstanding rights of common indemnity insurance policy was effected and that additional insurance could be required if there is supplemental borrowing against the mortgaged property
- your practice is duty bound to spell out to the mortgagor that the borrower will need to comply with any conditions of the outstanding rights of common indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the insurance
- you is obliged to disclose to the insurer all relevant information which you have obtained
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Bluestone Mortgages | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Britannia | Cover to the full value of the property. |
| Chelsea Building Society | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Intelligent Finance | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| Investec | The open market value of the property according to the valuation report. |
| Leeds Building Society | An amount at least equal to the amount of the mortgage advance plus 10%. Any indemnity insurance policy must protect the borrowers, any successor in title and any Mortgagee. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| Secure Trust Bank | An amount at least equal to the market value. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
Outstanding Rights of Common Contingency Insurance : Reflections
The extent of the terms for outstanding rights of common indemnity insurance are explained in the policy paperwork. Property lawyers should point the borrower to the outstanding rights of common indemnity insurance policy document. The intention of outstanding rights of common indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to determine that it is correct. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the outstanding rights of common indemnity insurance policy. Adequacy in this regard should be checked.Outstanding Rights of Common indemnity 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. Outstanding Rights of Common indemnity insurance Cover normally includes- 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.
- Money paid with consent in writing from the insurance company to free the property from the risks specified in the outstanding rights of common insurance.
- Diminution in value due to the successful enforcement of the risks specified in the outstanding rights of common indemnity insurance.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Expenses for 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 outstanding rights of common policy, to the extent that such costs are rendered abortive by court decision.
- Cover for compensation incurred in any action regarding the risks specified in the outstanding rights of common policy, including fees of a legal nature.
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 not be valid.
Other considerations for outstanding rights of common indemnity insurance
Outstanding Rights of Common Indemnity insurance isn’t a solution to all of the relevant problems. Information provided on this webpage is for general information for Regulated law firms in England and Wales on the the bank 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 is in relation to properties in England and Wales.