Outstanding Rights of Common Indemnity Insurance Lender conveyancing requirements
Yorkshire Bank Home Loans and Chelsea BS, as with most lenders, set their own requirements when it comes to outstanding rights of common indemnity insurance. This page sets out to enlighten conveyancing firms on the numerous bank approved list of panel lawyers 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 mortgage company, whether it be Yorkshire Building Society, Leeds Building Society or Natwest. 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?
Birmingham Midshires and Barclays like 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 must not incorporate terms that you know would invalidate or compromise the interests of the bank
- the outstanding rights of common indemnity insurance policy must be in favor of the mortgage company and, wherever possible, for the benefit of the mortgagor and any future registered proprietor or lender. Where the mortgagor will not be protected by the outstanding rights of common indemnity insurance policy, you must advise the mortgagor of this fact.
- your firm must explain to the borrower that the borrower must adhere to any conditions of the outstanding rights of common indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the insurance
- your practice are responsible for approving the terms of the outstanding rights of common policy on behalf of the bank
- the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your practice must disclose to the insurer all relevant information which you have acquired
- your practice must send a duplicate 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 additional insurance might be required if there is supplemental borrowing against the security of the property
- the outstanding rights of common indemnity insurance policy must be effected without cost to the bank
| 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. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Hodge Equity Release | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Precise | An amount at least equal to 110% of the mortgage valuation. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| RBS - Direct Line | An amount equal to the value of the property. |
| RBS - Direct Line One | An amount equal to the value of the property. |
| RBS- First Active | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
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 paperwork. Property lawyers should point your non-lender client to the outstanding rights of common indemnity insurance policy paperwork. The intention of outstanding rights of common indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so you should check any draft to determine that it is as it should be. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the outstanding rights of common indemnity insurance policy. It is well worth checking that the time frame is correct.Significant aspects and benefits of outstanding rights of common indemnity insurance :
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 are likely to cover the following- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Money paid with consent in writing from the insurance company to liberate the property from the risks specified in the outstanding rights of common policy.
- The out of pocket expenses 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.
- Liability for damages or compensation incurred in any action regarding the risks specified in the outstanding rights of common indemnity insurance, including fees of a legal nature.
- Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the outstanding rights of common indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Market value reduction due to the successful enforcement of the risks specified in the outstanding rights of common policy.
Always consider 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? Are legal costs covered?
Outstanding Rights of Common Indemnity Insurance has limitations - Additional considerations
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from outstanding rights of common insurance may be adequate for your client. Information contained within this webpage is for general information for conveyancers and solicitors in England and Wales on the the bank conveyancing panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the mortgage company 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.