Lender conveyancing panel requirements re Absentee Freeholder Indemnity Insurance
Santander and Barnsley BS, like the majority of mortgage companies, set their own specific instructions when it comes to absentee freeholder indemnity insurance. This page is designed to help property law practitioners on the different bank conveyancing panel where the title to be charged incorporates absentee freeholder. Solicitors should still check the CML handbook requirements for each lender, whether it be RBS, Coventry BS or Nationwide. The content on this page Is not to be read as absentee freeholder indemnity insurance advice.
Need help with absentee freeholder indemnity insurance from your lender?
Being a solicitor on a mortgage company panel you must disclose to the lender (see Section two of the UK Finance Lenders’ Handbook) if it becomes apparent that the freeholder is either missing or insolvent. If the bank are to lend, they may demand missing freeholder indemnity policy. Lenders’ approach is changing however and an increased number of lenders have tightened their requirements on the minimum lease term before they are prepared to lend. LENDER monitor has noted a changing attitude towards to absentee freeholder insurance. Numerousmortgage companies in the past stated that, they would have lent on an absentee freeholder, whereas they will no longer do so. See 5.14.15 to see if the lender accept indemnity insurance if the freeholder is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Darlington Building Society | Yes, but refer individual cases prior to submitting Certificate of Title |
| Family Building Society | Yes. |
| Foundation Home loans | We will accept such policies in limited circumstances on a case by case basis. The policies must be adequate and if this means that the Policy is to be bespoke (i.e. not a self-write) then it is our requirement that such a policy is to be taken. You must ensure that the requirements of Section 9 of Part 1 being met and the policy being the benefit of us, our transferees and our assignees. |
| Legal & General Home Finance | Please refer to the underwriting department. If indemnity insurance is accepted you must ensure that the insurance will make the title good and marketable and the insurance policy complies with the requirements of section 9. |
| Parity Trust | Refer to 1.7 |
| Reliance Bank | Yes |
| Tipton Coseley Building Society | No, we do not lend in these circumstances. |
About Absentee freeholder Indemnity Insurance
Many conveyancer across the UK regularly rely on missing freeholder policies to help move the conveyancing process when the freeholder or freeholder of land or premises is insolvent, absent or where Bona Vacantia applies in relation to removed companies. This results in an inability to pay ground rent and seek consent to lease assignments and alterations to the premises. The potential loss is that the freeholder may request ground rent or seek forfeiture of the lease on the premise of breach of covenant should they subsequently surface.
Leeds Building Society and HSBC as with the majority of mortgage companies, obligations require that where absentee freeholder indemnity insurance is effected:
- the absentee freeholder indemnity insurance policy must not contain terms which you are aware would invalidate or compromise the interests of the mortgage company
- the absentee freeholder indemnity insurance policy should be placed on risk without cost to the lender
- your firm are responsible for approving the terms of the absentee freeholder policy on behalf of the mortgage company
- you must provide a copy of the absentee freeholder indemnity insurance to the borrower and explain to the mortgagor why the absentee freeholder indemnity insurance policy was effected and that additional insurance might be mandatory if there is supplemental borrowing against the mortgaged property
- your practice is obliged to reveal to the insurer all relevant information which you have obtained
- the absentee freeholder indemnity insurance policy should always be for the benefit of the lender and, if possible, for the benefit of the borrower and any subsequent owner or bank. If the mortgagor will not be protected by the absentee freeholder indemnity insurance policy, you must advise the mortgagor of this fact.
- your firm must explain to the borrower that the borrower is obliged to adhere to any conditions of the absentee freeholder indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the insurance
- the limit of indemnity must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
| Lender | Requirement |
|---|---|
| Accord Buy to Let | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Barnsley Building Society | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Generation Home | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Hinckley and Rugby | The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| Legal & General Home Finance | The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| Metro Bank | The open market value of the property according to the valuation report. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Platform | 110% of principal sum. |
| Reliance Bank | \xA31,000,000.00 |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Topaz Finance | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
Absentee Freeholder Contingency Insurance : Reflections
The full terms, conditions and exclusions for absentee freeholder indemnity insurance are identified in the policy document. Conveyancing Practitioners are obliged to direct the borrower to the absentee freeholder indemnity insurance policy document. The intention of absentee freeholder indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check the document to ensure it is as it should be. The lifetime of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Absentee Freeholder indemnity insurance: Important characteristics and benefits:
Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Absentee Freeholder indemnity insurance Policies should be checked for the following- The cost of altering or taking down all, or part of the development and the reinstatement of the land, insofar as such alteration, demolition or re-instatement is made necessary by court order.
- Diminution in value resulting from the successful enforcement of the risks specified in the absentee freeholder policy.
- Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the absentee freeholder insurance.
- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the absentee freeholder policy, to the extent that such costs are rendered abortive by court decision.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the absentee freeholder policy, as well as incurred costs and expenses.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
Always consider what is not included in the absentee freeholder indemnity insurance e.g. does the policy cover any property that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?
Absentee Freeholder Indemnity Insurance has limitations - Further considerations
Absentee Freeholder insurance may satisfy lenders such as Yorkshire Bank Home Loans or Bank of Scotland and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner. Information contained within this webpage is for general information for conveyancers and solicitors in England and Wales on the the lender conveyancing panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most absentee freeholder Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The content set out above covers to properties in England and Wales.