Lender conveyancing panel requirements re Absentee Landlord Indemnity Insurance
Yorkshire Building Society and Birmingham Midshires, in common with many lenders, have their own requirements when it comes to absentee landlord indemnity insurance. This page sets out to enlighten domestic conveyancing firms on the various bank conveyancing panel where the title to be charged incorporates absentee landlord. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be Skipton, Godiva Mortgages or Virgin Money. The information on this page Is not to be read as absentee landlord indemnity insurance advice.
Need help with absentee landlord indemnity insurance from your lender?
In your capacity as a conveyancing practitioner on a bank panel you must report to the mortgage company (see Part 2 of the UK Finance Lenders’ Handbook) if it becomes apparent that the landlord is either absent or insolvent. If the bank are to lend, they may demand missing landlord indemnity policy. In some conveyancing matters a buyer or mortgage company might accept a missing landlord indemnity insurance but many purchasers or lenders will not be willing to move forward. See 5.14.15 to see if the lender accept indemnity insurance if the landlord is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| April Mortgages | Indemnity insurance is required if we agree to lend. Please contact on a case by case basis as per 1.11 |
| Bank of Scotland Private | This lender has not published an answer to this question. Please contact the lender.
|
| Co operative Bank | Yes, subject to the requirements of section 9 being met. |
| Monmouthshire Building Society | Yes provided you are satisfied that such insurance is a solution to the problem identified and you can give an unqualified Certificate of Title. The conditions in paragraph 9 must also be satisfied. Please add details of the Policy provider and the Policy number on the Certificate of Title and retain a copy on your file. |
| Mortgage Express (No 2) | This lender has not published an answer to this question. Please contact the lender.
|
| Nationwide Building Society | Yes, providing there are no more than 6 flats in the building (no need to contact the Issuing Office)-7 flats or more unacceptable |
| State Bank of India UK | Please refer to contact point in 1.11a with full details of the situation and your recommendation/advice. If we do agree to lend, indemnity insurance will be required. |
About Absentee Landlord Indemnity Insurance
Absentee Landlord Insurance is typically needed when the freeholder or landlord of land or residence is insolvent, unresponsive or where Bona Vacantia applies in relation to removed companies. This impacts the ability to pay ground rent and seek consent to lease assignments and alterations to the premises. The potential loss is that the landlord may request ground rent or take action for forfeiture of the lease claiming breach of covenant should they subsequently re-appear.
Chelsea BS and Natwest like many lenders, instructions are such that where absentee landlord indemnity insurance is to be taken out:
- the absentee landlord indemnity insurance policy needs to be in favor of the mortgage company and, wherever possible, in favour of the mortgagor and any subsequent registered proprietor or mortgage company. If the mortgagor will not be protected by the absentee landlord indemnity insurance policy, the mortgagor must be advised accordingly.
- your firm is duty bound to explain to the borrower that the borrower is obliged to comply with any conditions of the absentee landlord indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the insurance
- you must disclose to the insurer all relevant information which you have obtained
- the absentee landlord indemnity insurance policy must be placed on risk without charge to the mortgage company
- your firm must approve the terms of the absentee landlord policy on behalf of the mortgage company
- your practice must supply a duplicate of the absentee landlord indemnity insurance to the borrower and explain to the borrower why the absentee landlord indemnity insurance policy was effected and that a further policy could be required if there is further lending against the security of the property
- the limit of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- the absentee landlord indemnity insurance policy should not incorporate terms that you know would invalidate or compromise the interests of the mortgage company
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Bluestone Mortgages | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Lloyds TSB Scotland | The value of the property |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| Magellan Homeloans | At least equal to the value of the property |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Mortgage Express | Amount of loan + 15% |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| National Westminster Bank | An amount equal to the value of the property. |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
Non lender-specific considerations
The extent of the terms for absentee landlord indemnity insurance are shown in the policy document. Conveyancing Practitioners should direct your non-lender client to the absentee landlord indemnity insurance policy itself. Absentee Landlord Contingency insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check the document to determine that it is correct. The lifetime of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Important aspects and benefits of absentee landlord indemnity insurance :
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the absentee landlord indemnity insurance schedule. Absentee Landlord indemnity insurance Policies should be checked for the following- Reimbursement for compensation incurred in any proceedings concerning the risks specified in the absentee landlord indemnity insurance, including incurred costs and expenses.
- All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the absentee landlord policy.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- 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.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the absentee landlord policy, to the extent that such costs are rendered abortive by court order.
- Diminution in value due to the successful enforcement of the risks specified in the absentee landlord indemnity insurance.
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the absentee landlord policy will be invalidated.
Absentee Landlord Indemnity Insurance has limitations - Other considerations
Absentee Landlord Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that absentee landlord indemnity cover will not necessarily be the right solution. Information provided on this webpage is for general information for Regulated law firms 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 mortgage company 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 landlord 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 is in relation to properties in England and Wales.