Indemnity Insurance of Adverse Possession Bank conveyancing instructions

Halifax and Lloyds TSB, like the majority of lenders, set their own specific instructions when it comes to adverse possession indemnity insurance. This page is designed to help property law firms on the different lender solicitors panel where the title to be charged incorporates adverse possession. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, be it Santander, RBS or Barnsley BS. The information on this page is not focused on adverse possession indemnity insurance requirements.

Need help with adverse possession indemnity insurance from your lender?

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HSBC and Bank of Scotland in common with the majority of banks, obligations require that where adverse possession indemnity insurance is to be put on risk:

• the adverse possession indemnity insurance policy should not contain conditions that you recognise would invalidate or prejudice the interests of the bank
• you must disclose to the insurer all relevant information which you have obtained
• the adverse possession indemnity insurance policy should be placed on risk at no expense to the bank
• you is duty bound to spell out to the borrower that the borrower is obliged to comply with any conditions of the adverse possession indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the policy
• the limit of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• you are responsible for approving the terms of the adverse possession policy on behalf of the mortgage company
• you must supply a duplicate of the adverse possession indemnity insurance to the borrower and explain to the borrower why the adverse possession indemnity insurance policy was effected and that additional insurance may be mandatory if there is further borrowing against the security of the property
• the adverse possession indemnity insurance policy should always be for the benefit of the lender and, wherever possible, in favour of the borrower and any subsequent registered proprietor or lender. Where the borrower will not be covered by the adverse possession indemnity insurance policy, the borrower needs to be informed accordingly.

Regarding the extent of cover for the adverse possession indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the UK Finance handbook PII requirements for mortgage companies:

Non lender-specific considerations

The full terms, conditions and exclusions for adverse possession indemnity insurance are set out in the policy paperwork. Conveyancing solicitors are obliged to direct the borrower to the adverse possession indemnity insurance policy paperwork. The intention of adverse possession indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so you should check the schedule to ensure it is in order. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the adverse possession indemnity insurance policy. Again, please check that this is as you expected.

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Significant aspects and benefits of adverse possession Contingency 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. Adverse Possession indemnity insurance Policies are likely to cover the following

• 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.
• Reimbursement for compensation incurred in any action in respect of the risks specified in the adverse possession indemnity insurance, including legal and associated costs.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the adverse possession insurance, to the extent that such costs are rendered abortive by court order.
• All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Money paid with consent in writing from the insurance company to free the land from the risks specified in the adverse possession insurance.
• Diminution in value resulting from the successful enforcement of the risks specified in the adverse possession insurance.

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You also need to be sure that the answers on the application form are accurate. However remote the likelihood of a claim on the lender insurance policy might be you can be sure that the insurer will check the details on any proposal form very carefully before any claim is paid out.

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Adverse Possession Indemnity Insurance has limitations - Further considerations

Adverse Possession insurance may satisfy lenders such as Coventry BS or Godiva Mortgages and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.

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The above information covers to properties in England and Wales.