Absentee Landlord Indemnity Insurance Bank conveyancing requirements
Virgin Money and Barclays, like many mortgage companies, have their own requirements when it comes to absentee landlord indemnity insurance. This page sets out to enlighten conveyancing practitioners on the various lender approved list of panel lawyers where the title to be charged contains absentee landlord. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, for example Nationwide, Barnsley BS or Bank of Scotland. The content on this page is not focused on absentee landlord indemnity insurance requirements.
Need help with absentee landlord indemnity insurance from your lender?
Being a property lawyer on a bank panel you must notify to the mortgage company (see PII of the UK Finance Lenders’ Handbook) if it comes to your attention that the landlord is either missing or insolvent. If the mortgage company are to lend, they may accept missing landlord indemnity policy. In some conveyancing transactions a purchaser or mortgage company might accept a missing landlord indemnity policy but many buyers or lenders will not accept this as a solution. 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 |
|---|---|
| Allied Irish Bank | Refer to AIB Group (UK) plc, Central Securities (GB), 92 Anne Street, Belfast, BT1 3H |
| Chelsea Building Society | Yes provided you are satisfied that such insurance is a solution to the difficulty identified and you can give an unqualified Certificate of Title. You must retain a copy of any insurance policy on your file. |
| Mortgage Express | Yes |
| 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. |
| Tandem Bank | Yes, indemnity insurance is acceptable provided that you are satisfied that the insurance will make the title good and marketable. |
| The Mortgage Business | Yes, subject to the requirements of section 9 being met. |
| RBS - Direct Line One | Yes. |
About Absentee Landlord Indemnity Insurance
Thousands of lawyer across the country regularly rely on missing landlord insurance to help move the conveyancing process when the freeholder or landlord of land or residence is insolvent, absent or where Bona Vacantia applies in relation to removed companies. This impacts the ability to pay ground rent and obtain permission to lease assignments and alterations to the residence. The loss arises because the landlord may request ground rent or seek forfeiture of the lease claiming breach of covenant should they subsequently emerge.
HSBC and Halifax as with most mortgage companies, requirements are that where absentee landlord indemnity insurance is effected:
- the limit of indemnity must meet the requirements for the bank (See Part II Handbook requirements )
- your firm is required to disclose to the insurer all relevant information which you have obtained
- your firm must send a duplicate of the absentee landlord indemnity insurance to the mortgagor and explain to the borrower why the absentee landlord indemnity insurance policy was effected and that additional insurance might be necessary if there is supplemental borrowing against the mortgaged property
- your firm must approve the terms of the absentee landlord policy on behalf of the bank
- the absentee landlord indemnity insurance policy must be effected without expense to the lender
- your practice must point out to the mortgagor that the borrower will need to adhere to any conditions of the absentee landlord indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in relation to the policy
- the absentee landlord indemnity insurance policy should always be for the benefit of the bank and, if possible, in favour of the mortgagor and any next registered proprietor or mortgagee. Where the mortgagor will not be covered by the absentee landlord indemnity insurance policy, you must advise the mortgagor of this fact.
- the absentee landlord indemnity insurance policy should not contain terms which you are aware would invalidate or prejudice the interests of the mortgage company
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Chelsea 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. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| 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. |
| Lloyds | The value of the property. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Mortgage Express | Amount of loan + 15% |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Pepper Money | An amount equal to at least 110% of 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 and also the borrower(s). |
| Platform | 110% of principal sum. |
| 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. |
| Reliance Bank | \xA31,000,000.00 |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Tandem Bank | An amount at least equal to 110% of the purchase price or valuation – whichever is the greater. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| RBS - Direct Line One | An amount equal to the value of the property. |
Non lender-specific considerations
The full terms, conditions and exclusions for absentee landlord indemnity insurance are explained in the policy document. Property lawyers are obliged to direct your non-lender client to the absentee landlord indemnity insurance policy document. The intention of absentee landlord indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it is essential check the schedule to ensure it is correct. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the absentee landlord indemnity insurance policy. Adequacy in this regard should be checked.Absentee Landlord indemnity insurance: Significant aspects and benefits:
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- All sums paid with the written consent of the insurance company to liberate the land 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.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Market value reduction due to the successful enforcement of the risks specified in the absentee landlord insurance.
- Cover for compensation incurred in any action regarding the risks specified in the absentee landlord policy, including legal and associated costs.
- 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.
As with any insurance policy, 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.
Additional considerations for absentee landlord indemnity insurance
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 answer. Information provided on this webpage is for general information for conveyancers and solicitors in England and Wales on the the lender solicitor 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 covers to properties in England and Wales.