Possessory Title Indemnity Insurance Lender conveyancing requirements
Godiva Mortgages and Virgin Money, like most banks, dictate their own requirements when it comes to possessory title indemnity insurance. The content herein aims to help property law practitioners on the numerous lender approved list of panel lawyers where the title to be charged contains possessory title. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, for example Lloyds TSB, HSBC or Yorkshire Building Society. The content on this page is not focused on possessory title indemnity insurance requirements.
Need help with possessory title indemnity insurance from your lender?
Coventry BS and RBS as with the majority of mortgage companies, obligations require that where possessory title indemnity insurance is effected:
- you are responsible for approving the terms of the possessory title policy on behalf of the mortgage company
- the possessory title indemnity insurance policy should be placed on risk without charge to the bank
- your practice must supply a copy of the possessory title indemnity insurance to the mortgagor and explain to the mortgagor why the possessory title indemnity insurance policy was effected and that additional insurance could be necessary if there is supplemental borrowing against the mortgaged property
- you must point out to the borrower that the borrower must comply with any conditions of the possessory title indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the insurance
- the possessory title indemnity insurance policy needs to be in favor of the lender and, wherever possible, for the benefit of the mortgagor and any subsequent registered proprietor or mortgagee. Where the borrower will not be covered by the possessory title indemnity insurance policy, you must advise the borrower of this fact.
- the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your practice is obliged to reveal to the insurer all relevant information which you have obtained
- the possessory title indemnity insurance policy should not incorporate conditions that you are aware would invalidate or prejudice the interests of the mortgage company
| Lender | Requirement |
|---|---|
| Accord Mortgages | 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. |
| 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). |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market 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. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Cynergy Bank | The market value of the property. |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| First Direct | The value of the insurance must be for at least the full value of the property |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Hodge | 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. |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Pepper Money (UK) | An amount equal to at least 110% of 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 and also the borrower(s). |
| 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. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Ulster Bank | An amount equal to the value of the property. |
| Yorkshire Bank | Open market value of property. |
| 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. |
Non lender-specific considerations
The extent of the terms for possessory title indemnity insurance are set out in the policy paperwork. Conveyancing solicitors should point the borrower to the possessory title indemnity insurance policy paperwork. The intention of possessory title indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to determine that it is correct. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the possessory title indemnity insurance policy. It is well worth checking that the time frame is correct.Significant aspects and benefits of possessory title indemnity insurance :
This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Possessory Title indemnity insurance Policies should be checked for the following- 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 possessory title policy, to the extent that such costs are rendered abortive by court order.
- The cost of altering or taking down 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.
- Cover for compensation incurred in any action regarding the risks specified in the possessory title insurance, including legal and associated costs.
- All sums paid with the written consent of the insurance company to free the land from the risks specified in the possessory title indemnity insurance.
- Diminution in value due to the successful enforcement of the risks specified in the possessory title policy.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
Due diligence should extend to checking that the answers on the application form are accurate. Regardless of how remote a claim on the mortgage company insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being paid out.
Additional considerations for possessory title indemnity insurance
There may be consequences arising from the enforcement of the risks identified in the possessory title insurance which are not adequately covered by financial compensation. Content on this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company conveyancing panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the bank 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 possessory title 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.