TPE | Luxembourg
Speed, security and reduced cost in real estate transactions | Title Insurance
Title Insurance can cover known and unknown legal issues relating to property ownership,
allowing property investors and lenders to mitigate risk.
Two types of polices :
This policy will help speed up a property transaction, eliminating the need for lengthy negotiations on a legal issue on which seller and buyer have different views, covering the corresponding potential loss.
This policy will offer general property guarantees of a stable and A- rated quality if a seller is unable to do so.
The Known Risk Policy
A Known Risk Policy protects the insured against the possible future adverse consequences of an existing but latent a legal issue regarding property ownership. A servitude may be defective or incomplete, documents or authorisations may be missing (building permits, public procurement procedures, operating permits), corporate matters (required consents, interpretation of existing legal /corporate documentation of a PropCo), pending litigation, etc. The financial consequences of such legal risks are often difficult to assess and at the time of a property sale, buyer and seller may not find agreement on a price reduction or on the required guarantees (amount, duration, conditions). A latent legal issue with a small chance of realisation but with a significant potential impact on the value of the property, will delay negotiations and may even block them. The mortgage lender may impose additional conditions where there is such a latent legal issue. These matters will often lead to long and difficult negotiations.
A Known Risk Policy offers a solution :
- If the insured issue causes damage, the insurer will defend the insured’s interests and bear the costs of finding a solution including the payment of a settlement or damages awarded by the court.
- If no solution can be found the insured will be compensated for the permanent loss of value of the property.
- There is no need to prove fault for the insured.
- In exchange for a one-off premium the buyer is insured as long as the problem exists and as long as he is the owner of the insured property.
- Coverage can be extended to successive owners, therefore a Known Risk Policy will improve future marketability of the property.
- A Known Risk Policy can also serve to add coverage if a Warranty & Indemnity policy is in place but imposes exceptions for known issues.
- Lenders may take out a similar insurance, or become a beneficiary of a Known Risk Policy, which provides security and certainty to lenders, thereby potentially improving loan conditions and renegotiation terms.
A Known Risk Policy can take effect:
- when a sale is being prepared;
- at the time of acquisition;
- during the development phase of the property;
- when refinancing the property.
The Blanket Cover Policy
A Blanket Cover Policy can provide security if the seller cannot give general guarantees of sufficient quality in the event of a distressed or auction sale, or if the seller intends to liquidate shortly after the sale (investment funds) or if the seller simply doesn’t accept contingent liabilities.
The Blanket Cover Policy transfers the legal risks of a property transaction to an (A-rated) insurer for a longer term.
Property investors can use Blanket Cover Policies to obtain a standard quality of guarantees for all their property transactions without having to worry about the financial soundness of the seller, relying on the insurer’s IFS (“Insurer Financial Strength”)- rating.
A Blanket Cover Policy will simplify the legal structure of the transaction and the associated documentation:
- no need for escrow;
- transparent claim procedures
- no need for the seller to maintain corporate structures after the transaction date;
Blanket Cover Policies can relate to property ownership or share ownership of a company owning property, and usually do not impose any excess or deductible.