Absentee Landlord Indemnity Insurance Lender conveyancing requirements
Virgin Money and Bank of Scotland, like the majority of mortgage companies, set their own specific instructions when it comes to absentee landlord indemnity insurance. This page sets out to enlighten property law lawyers on the different mortgage company solicitors panel where the title to be charged contains absentee landlord. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be Halifax, Chelsea BS or Skipton. The information on this page is not focused on absentee landlord indemnity insurance requirements.
Need help with absentee landlord indemnity insurance from your lender?
As a conveyancing practitioner on a mortgage company panel you must notify to the mortgage company (see Part 2 of the UK Finance Lenders’ Handbook) if it becomes apparent that the landlord is either missing or insolvent. If the lender are to lend, they may insist on missing landlord indemnity insurance. Lenders’ approach is changing however and an increased number of banks 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 landlord insurance. A number of lendersmortgage companies previously stated that, they would have lent on an missing landlord, whereas they will no longer do so. See 5.14.15 to see if the mortgage company accept indemnity insurance if the landlord is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Bank of Ireland Mortgages | Only if such insurance covers us in the event of a failure to insure or repair the common parts and services. |
| LendInvest | Yes. However, your attention is drawn to 9.1 below. You must be satisfied that the insurance will make the title good and marketable and you can give an unqualified Certificate of Title. |
| Manchester Building Society | Yes, the limit of indemnity must equal the purchase price or valuation. |
| Masthaven Bank | No. |
| Metro Bank | Refer to Mortgage Operations Helpdesk, see 1.11. |
| Mortgage Express (No 2) | This lender has not published an answer to this question. Please contact the lender.
|
| Skipton Building Society | Yes, as long as our successors in title including purchasers on a repossession sale are also entitled to the benefit of the policy. |
About Absentee Landlord Indemnity Insurance
Many conveyancer throughout 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, absent or where Bona Vacantia applies in relation to defunct companies. This impacts the ability to pay ground rent and obtain consent to lease assignments and alterations to the premises. The loss arises because the landlord may request ground rent or take action for forfeiture of the lease alleging breach of covenant should they subsequently appear.
HSBC and RBS as with most mortgage companies, obligations require that where absentee landlord indemnity insurance is to be taken out:
- the absentee landlord indemnity insurance policy must not incorporate conditions that you know would invalidate or prejudice the interests of the lender
- your firm must disclose to the insurer all relevant information which you have obtained
- the absentee landlord indemnity insurance policy must be effected without cost to the lender
- you must supply a copy 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 a further policy could be mandatory if there is further lending against the security of the property
- the absentee landlord indemnity insurance policy should always be for the benefit of the lender and, if possible, for the benefit of the borrower and any future owner or bank. Where the borrower will not be protected by the absentee landlord indemnity insurance policy, the mortgagor must be informed accordingly.
- your practice must approve the terms of the absentee landlord policy on behalf of the mortgage company
- your practice is duty bound to spell out to the mortgagor that the borrower must comply with any conditions of the absentee landlord indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the insurance
- the limit of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Godiva Mortgages | Minimum of the value of the property. |
| 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. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| LendInvest | An amount at least equal to the valuation of the property. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Masthaven Bank | 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. |
| Metro Bank | The open market value of the property according to the valuation report. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| NRAM Ltd | 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. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| RBS - Direct Line One | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Whistletree | The value of the property |
Absentee Landlord Contingency Insurance : Reflections
The full terms, conditions and exclusions for absentee landlord indemnity insurance are set out in the policy paperwork. Conveyancing Practitioners should direct the borrower to the absentee landlord indemnity insurance policy itself. The intention of absentee landlord indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to ensure it is in order. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the absentee landlord indemnity insurance policy. Again, please check that this is as you expected.Significant features and benefits of absentee landlord Contingency insurance :
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 Landlord indemnity insurance Policies are likely to cover the following- Cover for compensation incurred in any proceedings in respect of the risks specified in the absentee landlord indemnity insurance, including incurred costs and expenses.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Market value reduction due to the successful enforcement of the risks specified in the absentee landlord insurance.
- Money paid with consent in writing from the insurance company to free the property from the risks specified in the absentee landlord insurance.
- Expenses for works (including professional fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the absentee landlord insurance, to the extent that such costs are rendered abortive by court order.
- The cost of altering or demolishing 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 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 not be valid.
Absentee Landlord Indemnity Insurance has limitations - Further considerations
There may be consequences arising from the enforcement of the risks identified in the absentee landlord policy which are not adequately covered by financial compensation.The above information covers to properties in England and Wales.