Indemnity Insurance of Absentee Landlord Bank conveyancing obligations
Lloyds TSB and Skipton, like many banks, have their own specific instructions when it comes to absentee landlord indemnity insurance. The content herein aims to help property law lawyers on the different mortgage company conveyancing panel where the title to be charged incorporates absentee landlord. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, be it Bank of Scotland, Natwest or Barnsley BS. 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 lender panel you must report to the mortgage company (see Section two 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 insurance. Banks’ 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 identified since 2008 a changing attitude towards to missing landlord insurance. A number of lendersbanks 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 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 |
| Bluestone Mortgages | Please contact: Settlements Team: Bluestone Mortgages, Floor 10, 40 Leadenhall Street, London EC3A 2BJ Tel no: 0800 368 1833 Option 3 Email: settlements@bluestonemortgages.co.uk |
| 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. |
| 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. |
| 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. |
| Topaz Finance | No. |
About Absentee Landlord Indemnity Insurance
Absentee Landlord Cover is typically needed when the freeholder or landlord of land or residence is insolvent, missing or where the company is no longer in existence. This results in an inability to pay ground rent and seek consent to lease assignments and alterations to the property. The potential risk is that the landlord may request ground rent or attempt forfeiture of the lease alleging breach of covenant should they subsequently re-appear.
Barclays and Virgin Money like many banks, requirements are that where absentee landlord indemnity insurance is to be taken out:
- you is required to reveal to the insurer all relevant information which you have gathered
- the level of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- your practice is duty bound to point out to the borrower that the borrower will need to comply with any conditions of the absentee landlord indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in respect of the policy
- 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 additional insurance might be required if there is supplemental lending against the security of the property
- you must approve the terms of the absentee landlord policy on behalf of the bank
- the absentee landlord indemnity insurance policy must be in favor of the lender and, wherever possible, in favour of the mortgagor and any future registered proprietor or mortgage company. Where the mortgagor will not be protected by the absentee landlord indemnity insurance policy, you must advise the mortgagor of this fact.
- the absentee landlord indemnity insurance policy should not incorporate terms which you know would void or prejudice the interests of the bank
- the absentee landlord indemnity insurance policy should be placed on risk at no expense to the bank
| 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. |
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| 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. |
| Bradford & Bingley | Amount of loan + 15% |
| Coutts & Co | The open market value of the property according to the valuation report. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| Magellan Homeloans | At least equal to the value of the property |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Molo Finance 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 mortgages. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| 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. |
| 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. |
General Absentee Landlord indemnity insurance points to consider
The full terms, conditions and exclusions for absentee landlord indemnity insurance are identified in the policy paperwork. Conveyancing solicitors are obliged to direct your non-lender client to the absentee landlord indemnity insurance policy paperwork. The intention of absentee landlord indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft 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. It is well worth checking that the time frame is correct.Significant aspects and benefits of absentee landlord indemnity 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- All sums paid with the written consent of the insurance company to free the property from the risks specified in the absentee landlord insurance.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- Cover for compensation incurred in any proceedings in respect of the risks specified in the absentee landlord indemnity insurance, as well as fees of a legal nature.
- The cost of works (including professional fees) for the purpose of the development begun, or contracted for, prior to 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.
- 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.
- Market value reduction due to the successful enforcement of the risks specified in the absentee landlord insurance.
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.
Supplemental 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 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.