Deed of Gift Indemnity Insurance Bank conveyancing requirements
Accord and RBS, like many banks, have their own specific instructions when it comes to deed of gift indemnity insurance. The purpose of this page to assist property law solicitors on the various mortgage company solicitors panel where the title to be charged contains deed of gift. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, for example Yorkshire Bank Home Loans, Natwest or Chelsea BS. The information on this page is not focused on deed of gift indemnity insurance requirements.
Need help with deed of gift indemnity insurance from your lender?
Practicing as a conveyancing practitioner on a bank panel, you must disclose to the lender where it comes to your knowledge that the title to the property is subject to a deed of gift or a transaction at an apparent undervalue completed within 5 years of the proposed loan. You must be sure that the lender will not be compromised under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. If you are unable to issue an unconditional certificate of title, you must put in place transfer at undervalue or deed of gift indemnity insurance .
You must also obtain clear bankruptcy checks against all parties to any deed of gift or transaction at an apparent undervalue.
About Deed of Gift Indemnity Insurance
Many conveyancers across the UK often rely on Deed of Gift policies owing to a proposed or existing transfer at undervalue or deed of gift including gifts of money towards the acquisition of a property. The potential loss arises where the person who transferred or “gifted” the premises (or the money) becomes insolvent their Trustee in Bankruptcy could set aside the transfer and claim an interest in the premises.
Birmingham Midshires and Skipton like many banks, instructions are such that where deed of gift indemnity insurance is to be taken out:
- your practice must supply a copy of the deed of gift indemnity insurance to the borrower and explain to the mortgagor why the deed of gift indemnity insurance policy was effected and that a further policy could be necessary if there is additional borrowing against the mortgaged property
- the deed of gift indemnity insurance policy should always be for the benefit of the mortgage company and, if possible, in favour of the mortgagor and any next registered proprietor or bank. If the mortgagor will not be protected by the deed of gift indemnity insurance policy, the borrower must be advised accordingly.
- the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )
- the deed of gift indemnity insurance policy must not contain terms which you are aware would invalidate or prejudice the interests of the mortgage company
- your firm must disclose to the insurer all relevant information which you have acquired
- you is duty bound to explain to the borrower that the borrower will need to adhere to any conditions of the deed of gift indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the policy
- the deed of gift indemnity insurance policy should be placed on risk at no charge to the bank
- your firm must approve the terms of the deed of gift policy on behalf of the bank
| Lender | Requirement |
|---|---|
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. 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). |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Barclays plc | Higher of purchase price or valuation |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Cynergy Bank | The market value of the property. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Halifax | An amount at least equal to the mortgage advance. |
| Holmesdale Building Society | 110% |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| 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. |
| Saffron Building Society | Higher of purchase price or valuation. 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). |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
General Deed of Gift indemnity insurance points to consider
The full terms, conditions and exclusions for deed of gift indemnity insurance are explained in the policy paperwork. Property lawyers are obliged to point your non-lender client to the deed of gift indemnity insurance policy paperwork. Deed of Gift indemnity insurance is devised to afford indemnity in respect of the risks specified in the policy schedule - so it’s important to 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.Deed of Gift Contingency insurance: Significant features and benefits:
This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Deed of Gift indemnity insurance Policies should be checked for the following- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Loss in market value due to the successful enforcement of the risks specified in the deed of gift indemnity insurance.
- The cost 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.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, before the commencement of proceedings for the enforcement of the risks specified in the deed of gift policy, to the extent that such costs are rendered abortive by court order.
- Reimbursement for compensation incurred in any action concerning the risks specified in the deed of gift insurance, including legal and associated costs.
- Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the deed of gift policy.
The above information is in relation to properties in England and Wales.