Dealing with Title Related Risks in 2012 and Beyond U
Underwriter Perspective
Mark Davies
Associate Director of UK Underwriting
mdavies@stewart.com
The term “Title Indemnity Insurance” means different things to different professionals – for example:
n For Lawyers it’s a remedy to an existing or potential defect in title be it for example a breach of covenant or lack of easement. It can also replace the need to carry out or update various conveyancing searches;
n For Lenders it’s the above and also a means of reducing the due diligence process required when obtaining security over land in certain circumstances and is therefore a tool which minimizes time and costs during the lending process; and
Mark Davies is an Associate Director of UK Underwriting at Stewart Title Limited.
Mark is a Chartered Legal Executive specialising in all aspects of residential and commercial property.
He has been employed by Stewart Title since August 1998, joining from Messrs Field Seymour Parkes of Reading and before that he was employed in Local Government and Private Practice. He has in excess of 25 years of residential and commercial conveyancing experience.
n For Property Developers it’s a means of covering a potential risk that may hinder the profitable development of a site and to ensure a proposed scheme can proceed without risk.
The common denominator is that all professionals are united in their expectation that Title Insurance will reduce risk to them and their clients.
Time can be wasted whilst solutions are sought to complex legal issues such as lack of access, defects in leases or issues relating to restrictive covenants. Often it is not possible to implement a legal solution if certain parties cannot be identified and found. A title indemnity policy for owners and their successors in title, tenants and lenders is the accepted option for dealing with such title defects in place of finding a legal solution.
The writing of such indemnity policies is a specialist matter and there are a small number of insurers who offer the cover necessary. Stewart Title Limited is an insurance company that has created a niche market for providing solutions that involve offering practical insurance policies for lawyers by underwriting bespoke indemnity policies for individual transactions.
Generally such indemnity policies will cover diminution in the value of the property and certain
costs and expenses which will arise when a claim is made by a third party claimant. However, certain additional covers may be required for example the cost of delay to a particular development, penalties or other liabilities for delay under building contracts and additional interest payable on borrowed money due to any such delay in being able to progress with a development due to a claim.
As with any policy of insurance the amount of cover requested is a matter for the insured but can be the full developed value of the site.
Policies generally are for the benefit of the insured named in the policy, their successors in title, their lenders and their successors in title, and any lessees for the time being and their lenders. The policies are written in perpetuity (unless otherwise stated) and are subject to a one-off premium, unless additional terms or changes are requested during the lifetime of the policy which may result in additional premium being paid. Lender-only policies are available on request, subject to appropriate underwriting.
Title defects - Examples n Adverse Possession - Part of the property to be acquired may be included within the physical boundaries of the property but the current owner cannot prove title to it in the usual way. Cover is provided for the risk that the true title owner may claim the return of the land.
n Lack of formal or legal easements in the title permitting rights of access or for rights for the provision of services such as mains water/ drainage, etc. When buying land, purchasers (especially those who want to develop the property) need to know that they have or will have the necessary rights to use the land as required. Alternatively, those rights may already exist but where an intensification of that use is planned there is the possibility of a challenge by other parties.
48 Author Viewpoint
Risk and Insurance in Private Equity and M&A 2012/13
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