Indemnity Insurance of Obstruction of Right of Way Mortgage Company conveyancing obligations

Bank of Scotland and Yorkshire Building Society, like most mortgage companies, set their own specific instructions when it comes to obstruction of right of way indemnity insurance. This page sets out to enlighten domestic conveyancing solicitors on the different lender approved list of panel lawyers where the title for the the property to be mortgaged includes obstruction of right of way. Solicitors should still check the CML handbook requirements for each lender, whether it be HSBC, Yorkshire Bank Home Loans or Barclays. The information on this page is not focused on obstruction of right of way indemnity insurance requirements.

Need help with obstruction of right of way indemnity insurance from your lender?

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Coventry BS and Halifax in common with most lenders, obligations require that where obstruction of right of way indemnity insurance is effected:

• the obstruction of right of way indemnity insurance policy must not contain terms which you are aware would invalidate or prejudice the interests of the bank
• your practice must provide a copy of the obstruction of right of way indemnity insurance to the borrower and explain to the borrower why the obstruction of right of way indemnity insurance policy was effected and that a further policy could be required if there is additional lending against the mortgaged property
• the minimum level of cover for the policy must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• you is obliged to disclose to the insurer all relevant information which you have obtained
• your firm must approve the terms of the obstruction of right of way policy on behalf of the mortgage company
• your practice must point out to the borrower that the borrower will need to adhere to any conditions of the obstruction of right of way indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the policy
• the obstruction of right of way indemnity insurance policy should be placed on risk at no cost to the bank
• the obstruction of right of way indemnity insurance policy should always be for the benefit of the bank and, if possible, for the benefit of the mortgagor and any subsequent registered proprietor or bank. Where the mortgagor will not be protected by the obstruction of right of way indemnity insurance policy, you must advise the mortgagor of this fact.

Regarding the extent of cover for the obstruction of right of way indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for banks:

General Obstruction of Right of Way indemnity insurance points to consider

The extent of the terms for obstruction of right of way indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners are obliged to point your non-lender client to the obstruction of right of way indemnity insurance policy document. The intention of obstruction of right of way indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so you should check the schedule to ensure it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the obstruction of right of way indemnity insurance policy. Again, please check that this is as you expected.

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Obstruction of Right of Way Contingency insurance: Important features and benefits:

The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the obstruction of right of way indemnity insurance schedule. Obstruction of Right of Way indemnity insurance Policies are likely to cover the following

• The cost of works (including professional fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the obstruction of right of way policy, to the extent that such costs are rendered abortive by court order.
• All sums paid with consent in writing from the insurance company to free the land from the risks specified in the obstruction of right of way policy.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
• 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.
• Diminution in value due to the successful enforcement of the risks specified in the obstruction of right of way insurance.
• Reimbursement for compensation incurred in any proceedings in respect of the risks specified in the obstruction of right of way indemnity insurance, as well as incurred costs and expenses.

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You also need to be sure that the answers on the application form are correct. Regardless of how remote a claim on the bank insurance policy might be you can rest assured that the insurer will check the details on any proposal form thoroughly before any claim is met.

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Obstruction of Right of Way Indemnity Insurance has limitations - Supplemental considerations

Obstruction of Right of Way insurance may satisfy lenders such as Leeds Building Society or Virgin Money 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 is in relation to properties in England and Wales.