Defective Title Indemnity Insurance in the Residential Property Market

In recent years I have noticed an increase in the number of applications we have had to make to obtain Defective Title Indemnity (DTI) insurance.  DTI cover is an Insurance Policy which provides cover for various problems that arise in residential or commercial transactions.  In fact the most interesting trend in the last few years has been the expansion of cover into new areas to which insurance can now be obtained for.

Traditionally Conveyancers shy away from insuring a risk, as they feel that problems should be resolved more pragmatically by way of a Rectifying Deed or Grant of an Easement or modification of a Restrictive Covenant.  This approach is as always commendable as it cures the difficulty and purifies the title.  The main reason I believe why insurance has been expanding is because of the unusual increase in the volume of property transactions during the middle part of the last decade.  As well as an enormous increase in the number of transactions there was considerable pressure, put upon Vendors in particular, to complete the transactions as quickly as possible.  Therefore the old tried and traditional methods of rectifying problems by various types of Deeds became impractical because of the pressures of market forces.

Another interesting development in the insurance market was that insurers appear to be more able to cope with applications quickly, and on top of this the premiums in comparison to the enormous increases in property valuations became much more reasonable.  Therefore it became a quick fix solution to oil the wheels in a problematic conveyancing transaction.

A further new development was that the underwriters seem to prefer situations where the paper title owner, or the Lessor, of a restrictive covenant, or the Grantor of land upon which an easement was being sought were not contacted and there were no negotiations with anyone entitled to any benefit.  Providing there was satisfactory evidence furnished to the underwriters, they appeared to be more willing to take greater risks than before.  This is not to say that these policies were issued recklessly, in fact the opposite is true as there has been an improvement in the industry with apparent better understanding of the difficulties by the underwriters prior to a policy being offered.  This was evident from the vast improvement in the quality of questions being asked during the application process.  This is a comfort to the profession, as it means that the risk has been properly assessed by the insurer, with a higher level of knowledge of the conveyancing problem to which the insurance is being sought to cover.

Gradually over the last seven years I have noticed that I have taken out a greater quantity of DTI Policies for our clients to provide them with added protection.  It is an area that I feel supplements the conveyancing process and does not negate our professionalism or skill as experts in this field.

I have spent a lot of time looking into this aspect of our conveyancing practice and I think that insurance is only going to increase in the future and this is to be welcomed.  There are an increasing number of areas to which the Conveyancer cannot provide sufficient protection to the Purchaser client and unfortunately insurance seems to be the only solution.  We have had a number of meetings with a company called First Title, who is a major player in this market.  We are writing this article particularly to try and obtain some feedback from our clients about a new policy that First Title are launching in England & Wales.  The policy is called a HOPP which stands for Home Owners Property Policy.  It is a concept that was introduced some time ago in Canada, where it was felt that Purchasing clients should be advised that there is an insurance solution or additional protection available to them when they purchase a property.  The policy would cover unforeseen difficulties and matters that may arise above and beyond the conveyancing process.  For example notifications of planning applications which were not disclosed in Property Certificates, cover for difficulties when purchasing from a Lender, selling after repossessing the property or persons acting as Personal Representatives to a deceased Vendor.  It is also now possible to get cover for a new area that has recently started to cause difficulties which relates to Northern Ireland Water owned pipes and sewers being built over, or being within four metres of, any part of the property.

We therefore propose in future months to prepare a Questionnaire to forward to those who subscribe to our website, asking them to assist us in gathering information as to whether or not a HOPP would be something they would be interested in if they were purchasing a property.  The purpose of this article is just as a way of an introduction to this Questionnaire and also to give our views in connection with insurance generally.

As always we welcome any comments from any of our clients or anybody else who reads these articles and we will endeavour to try and respond to any queries or responses received.

Simon Murray.