A case study looking at how Missing Inform highlighting how insurance and conveyancing risk management work in tandem.
In this case study, we take a look at a CLS Missing Information Legal Indemnity Insurance.
Would you take a risk and complete on a property where there is a missing document that is referred to in the land registry office copy entries? After all, it means that if the purchase goes ahead, the new property owner will be subject to whatever is said in the missing paperwork. Despite the recommendations of a conveyancing solicitor, some buyers are determined to proceed and that’s why CLS offer Missing Information Legal Indemnity Insurance. The policy covers the insured when matters referred to on the insured’s title cannot be ascertained as the original documents are missing.
The lost document problem
In any type of property purchase there can be a number of title risks posed to the would-be purchaser, some can be spotted instantly by a conveyancing solicitor and the risks of proceeding with the purchase highlighted to the buyer. However, when a conveyancer comes across a missing document problem, the risks of going ahead with the property purchase are impossible to quantify as the risk is hidden and may or may not emerge at a later stage.
The would-be property owner has several ways of approaching this title risk. At one extreme they can walk away from their purchase and at the other they can proceed to completion, ignoring the risk. Title indemnity insurance or a missing information policy is one possible alternative solution. The purchase proceeds but the buyer transfers the risk posed by a defective title through Legal Indemnity Insurance. If the missing information comes to light and adversely affects the buyer then the insurance policy is there for the insurer to lead negotiations, foot the bill for legal costs and pay either a settlement to a third party or loss in value compensation to the insured.
The missing conveyance
In our case study, a buyer was committed to purchasing a quaint mid-terrace property in a sought-after seaside town. During the conveyancing process her conveyancing solicitors spotted that a conveyance on the title, dating back to 1968, mentioned an earlier 1962 conveyance. Whilst the conveyancer was able to carefully consider the 1968 title document there was no sign of the 1962 conveyance.
Despite the risk appearing remote to the purchaser, the property solicitor advised the buyer that It would be sensible to take out a Missing Information Legal Indemnity Insurance, just in case the 1962 conveyance ever came to light and caused the purchaser problems. The purchaser proceeded with her purchase and the policy, paying an insurance premium of just £55.00 (Note: the price of policies vary and reflect the individual circumstances).
The Missing Information Legal Indemnity Insurance claim
Sadly, some insured quickly need to rely on their missing information insurance. In our case example, the owner of the delightful coastal terrace was horrified to see her neighbours in her garden. The neighbours said they weren’t trespassing but had a right of way across what the insured had thought was her private garden. The insured was deeply concerned as she had bought her property believing that her garden would be a calm oasis and not a thoroughfare for her neighbours to access their own gardens.
The insured and her neighbours had an exchange of words. The neighbours asserted they had a documented right to cross the insured’s garden. That right was, of course, written in the missing 1962 conveyance. A claim was made on the policy.
- Action – The CLS claims handler carefully looked into the validity of the claim. While technically the policy wording stated that only any documents referred to on the title that were missing were covered by the insurance policy, it was decided that as the 1968 conveyance was referred to in the office copy entries and the 1968 document mentioned the missing 1962 conveyance so the policy should not be declined on a technical point. Cover was confirmed and expert panel solicitors instructed to look further into the case and advise the insurer.
- Assessment – The specialist solicitors soon discovered just how bitter the dispute had become between the neighbours and the insured. The policy owner was clearly deeply upset by the situation she found herself in and wanted the policy to set things right from her perspective, namely legally challenge the right of her neighbours to keep walking through her garden. The trouble was that the neighbour rights were documented in the 1962 conveyance and therefore legally the insured could not achieve what she wanted through the policy.
- Solution –As the CLS panel solicitors advised that legal action against the neighbours was futile, as they had a legal documented right that was unchallengeable in court and were not willing to be bought off by a payment to stop their right of way over the insured’s garden, the only option was to look to settle matters with the insured for the diminution in value to her property. A local expert was instructed to assess the diminution in value caused by the discovery of the neighbour’s right to cross the insured’s garden and the consequent lack of privacy. This was valued at £15,000 but the insured thought she was entitled to sufficient compensation to cover the costs of selling the property and purchasing a similar quaint property but without missing title deeds or unexpected rights of way.
- The take out – CLS responded quickly and some would say generously in their interpretation of their policy cover, speedily informing the insured that despite the precise wording of the Legal Indemnity Insurance policy her claim was accepted. The lesson to be learnt is that whilst Missing Information Legal Indemnity Insurance is well worth the money (a £55 premium for a £15,000 pay out and payment of £11,500 in expert solicitor fees in trying to resolve matters with the neighbours) to some insured money doesn’t compensate for loss of privacy, whatever the experts assessment of the diminution in property value.
If you are a conveyancing solicitor being asked if Missing Information Legal Indemnity Insurance is value for money, then the answer in our opinion is undoubtedly yes but with a word of caution as neither the conveyancing solicitor nor the insurer has an inkling of whether the missing information will resurface and, if it does, whether it will affect the insured’s enjoyment of the property despite the compensation of a diminution in value pay out.
CLS here to help
CLS has over 15 years of experience in helping conveyancers with both residential and commercial property transactions. Our online portal is free to register and you’ll find our range of over 60 policies and products at your fingertips – including Variable Statements of Fact to let you customise to your client’s needs for the full range of legal indemnity policies. Online indemnity insurance protection is available within a matter of minutes. If you’d rather speak to someone, we also have a team of specialists who can help you out with a bespoke offline policy. Click here to start working with us.
This article was submitted to be published by CLS Property Insight as part of their advertising agreement with Today’s Conveyancer. The views expressed in this article are those of the submitter and not those of Today’s Conveyancer.
