Outstanding Rights of Common Indemnity Insurance Lender conveyancing requirements

Halifax and Barnsley BS, as with most banks, set their own requirements when it comes to outstanding rights of common indemnity insurance. This page is designed to help property law firms on the different bank solicitors panel where the title to be charged includes outstanding rights of common. It is not a substitute for checking the CML handbook requirements for each lender, be it RBS, HSBC or Chelsea BS. The information 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?

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Yorkshire Bank Home Loans and Barclays as with most mortgage companies, requirements are that where outstanding rights of common indemnity insurance is to be taken out:

• the outstanding rights of common indemnity insurance policy should always be for the benefit of the mortgage company and, if possible, for the benefit of the borrower and any next owner or bank. If the borrower will not be covered by the outstanding rights of common indemnity insurance policy, the borrower should be advised accordingly.
• 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 bank of any notice or potential claim in respect of the insurance
• your practice must approve the terms of the outstanding rights of common policy on behalf of the lender
• the minimum level of cover for the policy must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• the outstanding rights of common indemnity insurance policy should be placed on risk without cost to the bank
• you must provide a copy 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 might be required if there is further lending against the mortgaged property
• your practice must disclose to the insurer all relevant information which you have gathered
• the outstanding rights of common indemnity insurance policy must not contain terms which you know would void or compromise the interests of the lender

As to the level of cover for the outstanding rights of common 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 banks:

Outstanding Rights of Common Contingency Insurance : Reflections

The full terms, conditions and exclusions for outstanding rights of common indemnity insurance are shown in the policy paperwork. Conveyancing Practitioners are obliged to direct your non-lender client to the outstanding rights of common indemnity insurance policy itself. Outstanding Rights of Common Contingency insurance is designed to afford indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to determine that it is as it should be. The lifetime of this non-investment insurance agreement 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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Outstanding Rights of Common Contingency insurance: Important aspects and benefits:

The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the outstanding rights of common indemnity insurance schedule. Outstanding Rights of Common indemnity insurance Policies should be checked for the following

• All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Reimbursement for compensation incurred in any proceedings in respect of the risks specified in the outstanding rights of common insurance, including legal and associated costs.
• All sums paid with the written consent of the insurance company to liberate the property 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.
• The cost of works (including professional fees) for the purpose of the development begun, or contracted for, before the commencement of proceedings for the enforcement of the risks specified in the outstanding rights of common insurance, to the extent that such costs are rendered abortive by court decision.
• Loss in market value due to the successful enforcement of the risks specified in the outstanding rights of common indemnity insurance.

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Don't forget to check what is not included in the outstanding rights of common policy e.g. does the policy cover any residence that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?

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Outstanding Rights of Common Indemnity Insurance has limitations - Other considerations

There may be consequences arising from the enforcement of the risks identified in the outstanding rights of common policy which are not adequately covered by financial compensation.

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The above information is in relation to properties in England and Wales.