Absentee Landlord Indemnity Insurance Lender conveyancing requirements
Barnsley BS and Birmingham Midshires, like many banks, set their own requirements when it comes to absentee landlord indemnity insurance. This page is designed to help property law practitioners on the various lender approved list of panel lawyers where the title for the the property to be mortgaged contains absentee landlord. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, be it HSBC, Coventry BS or Nationwide. 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 mortgage company panel you must report to the mortgage company (see Part 2 of the UK Finance Lenders’ Handbook) if it comes to your attention that the landlord is either absent or insolvent. If the bank are to lend, they may insist on absentee landlord indemnity policy. In some conveyancing matters a buyer or lender might accept a missing landlord indemnity policy but many purchasers or lenders will not be willing to move forward. See 5.14.15 to see if the bank accept indemnity insurance if the landlord is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Coutts & Co | No, but may be accepted with our prior written approval. Please refer individual cases. See 1.11 |
| 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. |
| Hodge | 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. |
| Lloyds TSB Scotland | Indemnity insurance is required if we agree to lend. |
| ModaMortgages | We only lend if (a) there are six or less flats in the building and (b) appropriate indemnity insurance covering the issue is in place. A copy of the insurance policy should be submitted via email to completions@modamortgages.co.uk. Please include the Mortgage Reference Number which is on the first page of the Mortgage Offer. |
| Principality 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 section 9 must also be satisfied. You must provide us with a copy of the Policy and retain a copy of the Policy on your file. |
| Rely Mortgages | We only lend if (a) there are 6 or less flats in the building and (b) appropriate indemnity insurance covering the issue is in place. |
About Absentee Landlord Indemnity Insurance
Thousands of property lawyer across the country regularly rely on missing landlord policies to help move the conveyancing process when the freeholder or landlord of land or property is insolvent, missing or where the company is no longer in existence. This impacts the ability to pay ground rent and obtain consent to lease assignments and alterations to the property. The loss arises because the landlord may request ground rent or seek forfeiture of the lease claiming breach of covenant should they subsequently appear.
Halifax and Santander as with many banks, requirements are that where absentee landlord indemnity insurance is to be put on risk:
- your firm are responsible for approving the terms of the absentee landlord policy on behalf of the mortgage company
- your practice is duty bound to spell out to the borrower that the borrower must comply with any conditions of the absentee landlord indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the insurance
- the minimum level of cover for the policy must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your practice must reveal to the insurer all relevant information which you have acquired
- the absentee landlord indemnity insurance policy must not incorporate conditions that you are aware would invalidate or prejudice the interests of the lender
- your firm must provide a duplicate of the absentee landlord indemnity insurance to the borrower and explain to the mortgagor why the absentee landlord indemnity insurance policy was effected and that a further policy could be required if there is additional borrowing against the mortgaged property
- the absentee landlord indemnity insurance policy should be placed on risk at no expense to the mortgage company
- the absentee landlord indemnity insurance policy must be for the benefit of the bank and, wherever possible, for the benefit of the borrower and any future owner or mortgagee. Where the borrower will not be covered by the absentee landlord indemnity insurance policy, you must advise the borrower of this fact.
| Lender | Requirement |
|---|---|
| Accord Mortgages | 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. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| 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. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Hodge | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| Investec | The open market value of the property according to the valuation report. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Landmark | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| Lloyds | The value of the property. |
| Lloyds TSB Scotland | The value of the property |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| RBS - Virgin One | An amount equal to the value of the property. |
| Yorkshire 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. |
Absentee Landlord Contingency Insurance : Reflections
The extent of the terms for absentee landlord indemnity insurance are set out in the policy document. Property lawyers should point the borrower to the absentee landlord indemnity insurance policy itself. Absentee Landlord indemnity insurance is devised to afford indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to ensure it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Significant characteristics and benefits of absentee landlord Contingency insurance :
The policy 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 are likely to cover the following- Money paid with the written consent of the insurance company to free the property from the risks specified in the absentee landlord policy.
- Expenses for works (including professional fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the absentee landlord insurance, 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 landlord insurance, including incurred costs and expenses.
- Loss in market value due to the successful enforcement of the risks specified in the absentee landlord indemnity insurance.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
- The out of pocket expenses of altering or destroying 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.
Always check what is not included in the absentee landlord indemnity insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the commencement of the policy? Does it cover legal costs?
Absentee Landlord Indemnity Insurance has limitations - Further 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 bank approved 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.