Title Indemnity Insurance is a form of insurance which protects owners and mortgage lenders against financial loss resulting from challenges to or defects in title by transferring the risk to the insurer. Typical issues which could be covered by this type of insurance could be missing title deeds, lack of right of way for access or services, an ongoing breach of a restrictive covenant in a Lease or an extension which has been built over, or near to, a public sewer.
Usually the vendor in the transaction is responsible for paying the premium. In most cases the cover lasts forever, or at the very least, the term of the mortgage and the limit of indemnity is commonly the value of the property. A map of the property will often need to be produced marked with the areas in issue and sometimes a Statutory Declaration of the vendor is required as evidence of the situation to date.
These types of policies were virtually unheard of in our jurisdiction a decade ago. Any defects in title were dealt with, if they could be, by way of, (but not limited to), rectifying deeds or granting of new easements. However, there has been a shift in conveyancing practice in Northern Ireland over the last ten years whereupon, more often, the first thought when uncovering a title problem is to consider insuring the risk. This is a result of the increased pressure on vendors to complete the transaction as quickly as possible.
Remedying the problem by means of rectification or a grant of a new easement can take considerable time, money and the outcome is not guaranteed. For example, the owner of the field next to you, over which your utility services currently traverse, may refuse to grant you the formal right of way required by a purchaser in order to sell your property. However, a draft title indemnity policy to cover the risk of your neighbour refusing to let your services traverse their land, could be available in a few clicks of a mouse!
The premiums could be much cheaper than “rectifying” the problem and there is certainty of outcome – if a claim is made, it will be dealt with by way of litigation, settlement or indemnity by the insurer. However, of paramount importance is that any efforts to fix the problem can render the defect uninsurable! So, in this example, no attempt must be made to talk to the neighbour about the easement required, as this may jeopardise the chance of obtaining insurance and potentially the transaction and others in the chain!
The market for title indemnity insurance has increased drastically and so have the risks which can be covered. Title Indemnity Policies are now commonplace in the conveyancing process, supplementing the skill and due diligence of the solicitor in completing your transaction. Most lenders are happy to accept these policies with the title and usually don’t ask to see them before the transaction completes. Your solicitor will explain the terms of the policy to you.
The main points to note are that as long as you are aware of its existence, do not do anything which may render the policy invalid and notify the insurer of a claim if one arises, you can be content that the problem on title has been dealt with.
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