I recently saw an advertisement in one of the English legal periodicals for a Company called First Title who are well known and well established Title Insurance providers and was intrigued by a new insurance product in the residential conveyancing market called a HOPP. HOPP stands for Home Owners Protection Policy and is a special Insurance Policy only being marketed and sold in England and Wales by First Title. The Policy is a novel concept and we don’t believe it has previously been marketed in the UK and provides cover against risks that can arise when buying or selling a residential property. It affords Purchasers protection against a number of unforeseen or unidentified problems that can have catastrophic consequences after the conveyance has been completed.
This optional insurance offers comprehensive protection for Purchasers in connection with their ownership and interest in their new home for as long as they own it. It therefore adds a lifetime of protection against risks. However diligently the conveyancing solicitor completes your transaction, it is impossible to identify and protect against all risks that may arise after purchasing the property. Therefore a HOPP offers greater protection to a Purchaser than the normal Professional Indemnity Insurance Cover that a solicitor in Northern Ireland would have.
What does the HOPP cover?
The HOPP covers virtually all of the standard conveyancing indemnities and where risks are known. For example restrictive covenants can be identified and be added to the Policy free of charge. It removes the need of stand alone Indemnity Policies and the following covers are included as standard as well as options to include known risks without extra costs:-
1. Lack of Building Regulations or Planning Permissions (even when alterations or extensions are built in the last twelve months).
2. Lack of easements.
3. Search covers for all standard Searches (except environmental matters).
4. Restrictive covenants.
What will it cost?
The HOPP has been competitively priced to provide real value for money for properties with a purchase price of £250,000.00 or less. It is a one off premium for the HOPP which will amount to £250.00 plus the Insurance Premium Tax (IPT). For properties with a purchase price over £250,000.00, the one off premium for the HOPP will be charged at 0.1% of the purchase price of the property plus IPT.
(i) Property price – HOPP premium – up to £250,000.00 – flat rate £250.00 plus IPT.
(ii) Property price – £350,000.00 at 0.1% of the purchase price – £350.00 plus IPT.
(iii) Property price – £475,000.00 at 0.01% of the purchase price – £475.00 plus IPT.
(iv) Property price – £550,000.00 at 0.1% – £500.00 plus IPT.
Why should I consider taking a HOPP?
The main reason for obtaining a HOPP is that it provides cover against a range of unknown or unforeseen perils which can have devastating personal financial consequence after you have purchased a property. This level of protection is not available through any other standard Insurance Policy, so the HOPP is the Purchaser’s only option to protect themselves against these risks, eg. boundary disputes including disputes over walls, fences and hedges, deliberate or accidental misrepresentation by the Seller, fraud and forgery.
This is a new and novel and concept to England and Wales and has not yet been rolled out to Scotland or Northern Ireland. However the HOPP has been used successfully in Canada which has a similar conveyancing system to Northern Ireland. It was initially introduced about 15 years ago when the Canadian property market was in a recession similar to the one we are experiencing in Northern Ireland. In order to bring confidence back to the market, the HOPP was introduced as a confidence boosting Policy for Purchasers. It took some time for the Policies to become part of the conveyancing process and Canadian conveyancing lawyers introduced a regulation, whereby it was compulsory for a Purchasing client to be advised of the benefits of the Policy. They took the view that it is the Purchaser’s solicitors’ duty of care to advise the client that a HOPP is available. The client then has to sign a waiver form if they decide not to take the HOPP. This practice helped to establish the HOPP in the Canadian property market.
One of the reasons the HOPP took off in Canada was because of the extra cover it provides in areas where there is considerable risk such as boundary disputes and mortgage fraud. In the UK the level of boundary disputes is staggering. There are approximately 260,000 of these disputes currently being litigated all over the UK and mortgage fraud is estimated to cost approximately £1bn every year. These are examples of the areas that the HOPP will cover and give comfort in respect of.
The HOPP also protects clients against mistakes made during the conveyancing process without the need to prove negligence. It does not replace the Professional Indemnity Insurance provided by the Conveyancing Solicitor, but it offers an easier route to recovery with more immediate benefits, such as covering the cost of alternative accommodation while the problem is being resolved. Other benefits are that there is no Policy excess. Legal expenses are included separately from the sum insured and there is a 200% inflation clause, meaning that the Policy realistically provides protection for hopefully the full period of the property ownership.
We are currently investigating this new and exciting produce to see if it will be suitable for our clients and for our practice. We have consulted with First Title and they have provided us with a lot of information which has enabled us to prepare this article.
We have also started to canvas our existing clients, and the initial response is favourable. We would however like to canvas all the readers of this article to see how they would view the availability of a HOPP in Northern Ireland. Therefore we would be obliged, if you could forward your comments to us at the following email address: firstname.lastname@example.org stating whether or not you would be interested in a HOPP if it was available in Northern Ireland.
In conclusion, one of my clients asked me whether or not I would take a HOPP out if was available. The answer is most definately Yes. The reason being that I am only too aware from my own experience, of the unforeseen difficulties that can arise with even the most diligent of conveyancing solicitors. To ensure against these unforeseen risks at a relatively modest level seems sensible. I for one hope that the HOPP does become available in the Northern Ireland conveyancing market in the next twelve months.