Deed of Gift Indemnity Insurance Lender conveyancing requirements
Bank of Scotland and Halifax, in common with the majority of banks, dictate their own requirements when it comes to deed of gift indemnity insurance. This page is designed to help property law solicitors on the various lender solicitors panel where the title for the the property to be mortgaged contains deed of gift. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Chelsea BS, RBS or Skipton. The information on this page Is not to be read as deed of gift indemnity insurance advice.
Need help with deed of gift indemnity insurance from your lender?
Practicing as a property lawyer on a lender panel, you must report to the bank 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 inside 5 years of the proposed mortgage. You need to be sure that the mortgage company will acquire their interest in good faith and will be protected under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. Where you are not able to submit an unconditional certificate of title, you must arrange transfer at undervalue or deed of gift indemnity insurance .
You must also obtain clear bankruptcy searches against all parties to any deed of gift or transaction with the potential of being regarded at an undervalue.
About Deed of Gift Indemnity Insurance
Thousands of conveyancers across the UK regularly recommend Deed of Gift policies owing to a proposed or existing transfer at undervalue or deed of gift including gifts of money towards the buying of a residence. The potential loss arises where the person who transferred or “gifted” the property (or the money) becomes bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.
Yorkshire Building Society and Barclays in common with many mortgage companies, instructions are such that where deed of gift indemnity insurance is to be taken out:
- the minimum level of cover for the policy must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- your practice must point out to the borrower that the borrower will need to comply with any conditions of the deed of gift indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the insurance
- the deed of gift indemnity insurance policy should always be for the benefit of the bank and, wherever possible, in favour of the mortgagor and any subsequent registered proprietor or mortgage company. If the mortgagor will not be covered by the deed of gift indemnity insurance policy, you must advise the borrower of this fact.
- you is required to reveal to the insurer all relevant information which you have acquired
- you must send a copy of the deed of gift indemnity insurance to the mortgagor and explain to the borrower why the deed of gift indemnity insurance policy was effected and that additional insurance may be required if there is supplemental borrowing against the mortgaged property
- your firm must approve the terms of the deed of gift policy on behalf of the lender
- the deed of gift indemnity insurance policy must be placed on risk without charge to the lender
- the deed of gift indemnity insurance policy must not contain terms which you recognise would void or compromise the interests of the mortgage company
|Bank of Scotland|| Not less than mortgage advance plus 10%|
|Co operative Bank||Cover to full value of the property.|
|Cynergy Bank||The market value of the property.|
|Darlington Building Society||The higher of value or purchase price of the property.|
|Ecology Building Society||An amount equal to at least 110% of the mortgage advance|
|Family Building Society||An amount at least equal to the mortgage advance.|
|Foundation Home loans|| An amount equal to 110% of the valuation or purchase price - whichever is the greater.|
|GE Money||GE Money Home Lending has withdrawn from the UK mortgage market.|
|Hodge Equity Release||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.|
|ITL Mortgages||Minimum of the value of the property.|
|JPMorgan||110% of principal sum.|
|Lloyds||The value of the property.|
|Lloyds|| The value of the property.|
|Mortgage Express (No 2)|| |
[This lender has not published an answer to this question. Please contact the lender.]
|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).|
|Rooftop Mortgages||The value of the property for mortgage purposes as disclosed in the valuation.|
|State Bank of India UK||The purchase price or value of the property, whichever is the higher.|
|The Mortgage Business|| An amount at least equal to the mortgage advance/credit limit - whichever is the highest.|
|Ulster Bank||An amount equal to the value of the property.|
Deed of Gift Contingency Insurance : ReflectionsThe full terms, conditions and exclusions for deed of gift indemnity insurance are set out in the policy document. Conveyancing Practitioners are obliged to point the borrower to the deed of gift indemnity insurance policy paperwork. The intention of deed of gift 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 continuance 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: Important aspects and benefits:The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the deed of gift indemnity insurance schedule. Deed of Gift indemnity insurance Policies are likely to cover the following
- Reimbursement for compensation incurred in any action regarding the risks specified in the deed of gift policy, as well as fees of a legal nature.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- The cost of works (including professional fees) for the purpose of the development commenced, prior to 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 decision.
- Diminution in value resulting from the successful enforcement of the risks specified in the deed of gift policy.
- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the deed of gift indemnity insurance.
- 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.
The above information is in relation to properties in England and Wales.
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