Mortgage Company conveyancing panel conditions re Outstanding Rights of Common Indemnity Insurance

Halifax and Chelsea BS, as with the majority of banks, dictate their own requirements when it comes to outstanding rights of common indemnity insurance. This page is designed to help conveyancing firms on the numerous lender conveyancing panel where the title to be charged incorporates outstanding rights of common. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each lender, be it Birmingham Midshires, Yorkshire Building Society or HSBC. The information on this page Is not to be read as outstanding rights of common indemnity insurance advice.

Need help with outstanding rights of common indemnity insurance from your lender?

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Natwest and Santander in common with most lenders, instructions are such that where outstanding rights of common indemnity insurance is effected:

• the outstanding rights of common indemnity insurance policy should always be in favor of the bank and, if possible, for the benefit of the borrower and any future registered proprietor or mortgagee. Where the mortgagor will not be protected by the outstanding rights of common indemnity insurance policy, the mortgagor must be informed accordingly.
• your practice is duty bound to point out to the mortgagor that the borrower is obliged to adhere to any conditions of the outstanding rights of common indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the policy
• the outstanding rights of common indemnity insurance policy should be effected at no expense to the mortgage company
• the outstanding rights of common indemnity insurance policy must not incorporate conditions which you are aware would void or compromise the interests of the bank
• you must disclose to the insurer all relevant information which you have obtained
• you must provide a duplicate of the outstanding rights of common indemnity insurance to the borrower and explain to the mortgagor why the outstanding rights of common indemnity insurance policy was effected and that additional insurance might be necessary if there is further lending against the security of the property
• the limit of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
• your practice must approve the terms of the outstanding rights of common policy on behalf of the mortgage company

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 UK Finance handbook PII requirements for lenders:

General Outstanding Rights of Common indemnity insurance points to consider

The extent of the terms for outstanding rights of common indemnity insurance are explained in the policy paperwork. Conveyancing solicitors should point the borrower to the outstanding rights of common indemnity insurance policy document. The intention of outstanding rights of common 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 ensure it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.

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Significant characteristics and benefits of outstanding rights of common Contingency insurance :

The insurance 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 Cover normally includes

• Reimbursement for compensation incurred in any proceedings concerning the risks specified in the outstanding rights of common policy, as well as legal and associated costs.
• The cost 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.
• 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.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• 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 insurance, to the extent that such costs are rendered abortive by court decision.
• Diminution in value due to the successful enforcement of the risks specified in the outstanding rights of common policy.

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Due diligence should extend to checking that the answers on the application form are correct. However remote the likelihood of 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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Supplemental considerations for outstanding rights of common indemnity insurance

Outstanding Rights of Common Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that outstanding rights of common indemnity cover will not necessarily be the right solution.

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