Bank conveyancing panel requirements re Lack of Planning Permission Indemnity Insurance
Chelsea BS and Yorkshire Building Society, in common with most lenders, set their own requirements when it comes to lack of planning permission indemnity insurance. The content herein aims to help conveyancing lawyers on the various bank conveyancing panel where the title to be charged contains lack of planning permission. It is not a alternative for checking the CML handbook requirements for each bank, be it Barclays, Halifax or Virgin Money. The information on this page Is not to be read as lack of planning permission indemnity insurance advice.
Need help with lack of planning permission indemnity insurance from your lender?
As a solicitor on a mortgage company panel you must make appropriate searches and enquiries take all reasonable steps (including any further enquiries to clarify any issues which may arise) to ensure the residence has the correct planning permissions (including listed building consent) for its construction and any subsequent change to the property and its current use; and there is no apparent breach of the conditions of that or any other consent or certificate affecting the property; and that no matter is revealed which would prohibit the property from being used as residential property or that the property may be the subject of enforcement proceedings.
If there is evidence of such a breach or matter but in your professional judgment there is no reasonable likelihood of enforcement action and, following appropriate enquiries, and you are assured that the title is good and marketable and are in a position to submit an unqualified COT, the lender may not insist on Lack of Planning Permission indemnity insurance and you may proceed.
If there is such evidence and all outstanding conditions will not be satisfied by completion, where you are not able to provide an unconditional COT, you should reveal this to the bank in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each mortgage company such as Chelsea BS or Yorkshire Building Society will take a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Insurance is typically needed where there is no proof of compliance with conditions can be supplied for works that have been in existence for a year or more, whether a domestic property or large commercial project. The consequential losses flow from the successful enforcement proceedings by the local authority. In a typical conveyancing scenario the seller would be expected to pay the premium for the Lack of Planning Permission Indemnity Insurance, which would be taken out in the buyer’s name as well as the bank.
A lack of planning permission indemnity insurance policy is in most cases more cost effective than obtaining retrospective consent and is without question significantly quicker. The flipside is that the risk of enforcement action does not disappear.
Godiva Mortgages and Barnsley BS in common with most mortgage companies, instructions are such that where lack of planning permission indemnity insurance is to be put on risk:
- you is duty bound to point out to the mortgagor that the borrower is obliged to comply with any conditions of the lack of planning permission indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the insurance
- the lack of planning permission indemnity insurance policy must not incorporate conditions that you recognise would void or compromise the interests of the lender
- your firm is obliged to reveal to the insurer all relevant information which you have obtained
- the lack of planning permission indemnity insurance policy should be placed on risk at no expense to the mortgage company
- your practice are responsible for approving the terms of the lack of planning permission policy on behalf of the bank
- the lack of planning permission indemnity insurance policy should always be in favor of the mortgage company and, wherever possible, in favour of the borrower and any next owner or lender. Where the borrower will not be covered by the lack of planning permission indemnity insurance policy, you must advise the mortgagor of this fact.
- your practice must provide a duplicate of the lack of planning permission indemnity insurance to the mortgagor and explain to the mortgagor why the lack of planning permission indemnity insurance policy was effected and that a further policy could be required if there is additional borrowing against the mortgaged property
- the level of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Adam & Company | The open market value of the property according to the valuation report. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Aviva Equity Release | Full value of the property. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Britannia | Cover to the full value of the property. |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Intelligent Finance | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Metro Bank | The open market value of the property according to the valuation report. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| Pepper Money (UK) | 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). |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| St James Place | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
| Zephyr Mortgages | 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. |
General Lack of Planning Permission indemnity insurance points to consider
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are explained in the policy paperwork. Property lawyers should direct your non-lender client to the lack of planning permission indemnity insurance policy itself. The intention of lack of planning permission indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the document to ensure it is as it should be. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the lack of planning permission indemnity insurance policy. Again, please check that this is as you expected.Significant aspects and benefits of lack of planning permission Contingency insurance :
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the lack of planning permission indemnity insurance schedule. Lack of Planning Permission indemnity insurance Policies are likely to cover the following- Loss in market value due to the successful enforcement of the risks specified in the lack of planning permission indemnity insurance.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
- 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 lack of planning permission insurance, to the extent that such costs are rendered abortive by court order.
- All sums paid with consent in writing from the insurance company to free the land from the risks specified in the lack of planning permission insurance.
- Reimbursement for compensation incurred in any action in respect of the risks specified in the lack of planning permission policy, as well as fees of a legal nature.
- The out of pocket expenses 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 lack of planning permission policy will not be valid.
Lack of Planning Permission Indemnity Insurance has limitations - Supplemental considerations
Lack of Planning Permission Indemnity insurance isn’t a solution to all of the relevant problems.The above information is in relation to properties in England and Wales.