Bank conveyancing panel requirements re Absentee Freeholder Indemnity Insurance
Chelsea BS and Godiva Mortgages, like most mortgage companies, dictate their own specific instructions when it comes to absentee freeholder indemnity insurance. This page is designed to help property law lawyers on the various bank approved list of panel lawyers where the title for the the property to be mortgaged incorporates absentee freeholder. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, be it Coventry BS, Halifax or Nationwide. The content on this page Is not to be read as absentee freeholder indemnity insurance advice.
Need help with absentee freeholder indemnity insurance from your lender?
Being a conveyancing practitioner on a mortgage company panel you must notify to the mortgage company (see PII of the UK Finance Lenders’ Handbook) if it comes to your attention that the freeholder is either missing or insolvent. If the bank are to lend, they may demand absentee freeholder indemnity policy. In some conveyancing transactions a buyer or mortgage company might accept a missing freeholder indemnity policy but many purchasers or lenders will not be willing to move forward. See 5.14.15 to see if the lender accept indemnity insurance if the freeholder is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Barnsley Building Society | Yes, provided you are satisfied that such insurance is a solution to the difficulty identified and you can give an unqualified Certificate of Title. You must retain a copy of any insurance policy on your file. |
| Birmingham Midshires | Yes, subject to the requirements of section 9 being met. |
| HSBC UK Bank | Yes, indemnity insurance is acceptable. |
| Hodge | 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. |
| Paragon Residential | Generally no, but:- (i) Where the security comprises a house, we may be prepared to accept a suitable indemnity policy if the landlord is absent or insolvent where the lease term is a long lease such as 999 years or similar. (ii) Where the security comprises a flat, we may be prepared to accept a suitable indemnity policy if the landlord is absent or insolvent if:- 1. the term of the lease remaining at the end of the mortgage is a minimum of 100 years; and 2. there are no more than two flats in the block; and 3. there is sufficient evidence that the owners of the flats are performing the obligations imposed on the landlord, particularly, in respect of repairing and insuring the building. |
| Scottish Building Society | Yes, provided you are satisfied that such insurance is a solution to the difficulty identified and you can give an unqualified Certificate of Title. You must retain a copy of the insurance policy on your file. The insurance must meet the requirements of section 9. |
| Tipton Coseley Building Society | No, we do not lend in these circumstances. |
About Absentee freeholder Indemnity Insurance
Thousands of solicitor throughout the UK regularly rely on absentee freeholder policies to help move the conveyancing process when the freeholder or freeholder of land or residence is insolvent, absent 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 residence. The potential loss is that the freeholder may request ground rent or seek forfeiture of the lease claiming breach of covenant should they subsequently re-appear.
RBS and Yorkshire Building Society in common with the majority of mortgage companies, obligations require that where absentee freeholder indemnity insurance is to be put on risk:
- you must approve the terms of the absentee freeholder policy on behalf of the mortgage company
- the absentee freeholder indemnity insurance policy must be placed on risk at no cost to the lender
- the limit of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- the absentee freeholder indemnity insurance policy needs to be in favor of the lender and, wherever possible, for the benefit of the mortgagor and any next registered proprietor or lender. Where the mortgagor will not be protected by the absentee freeholder indemnity insurance policy, the mortgagor needs to be advised accordingly.
- your practice must spell out to the borrower that the borrower must adhere to any conditions of the absentee freeholder indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the insurance
- you must provide a duplicate of the absentee freeholder indemnity insurance to the borrower and explain to the mortgagor why the absentee freeholder indemnity insurance policy was effected and that a further policy might be necessary if there is supplemental lending against the security of the property
- the absentee freeholder indemnity insurance policy should not contain conditions which you know would void or prejudice the interests of the lender
- your firm must disclose to the insurer all relevant information which you have gathered
| Lender | Requirement |
|---|---|
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Barnsley 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. |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Bradford & Bingley | Amount of loan + 15% |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Hodge | 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. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| 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. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| National Westminster Bank | An amount equal to the value of the property. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| Tandem Bank | An amount at least equal to 110% of the purchase price or valuation – whichever is the greater. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Ulster Bank | An amount equal to the value of the property. |
Non lender-specific considerations
The extent of the terms for absentee freeholder indemnity insurance are set out in the policy document. Conveyancing solicitors should point your non-lender client to the absentee freeholder indemnity insurance policy itself. The intention of absentee freeholder indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so you should check any draft to ensure it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the absentee freeholder indemnity insurance policy. Adequacy in this regard should be checked.Significant features and benefits of absentee freeholder indemnity insurance :
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. Absentee Freeholder indemnity insurance Policies should be checked for the following- Money paid with consent in writing from the insurance company to free the land from the risks specified in the absentee freeholder 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.
- Cover for compensation incurred in any proceedings regarding the risks specified in the absentee freeholder policy, as well as fees of a legal nature.
- Diminution in value due to the successful enforcement of the risks specified in the absentee freeholder insurance.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the absentee freeholder indemnity insurance, to the extent that such costs are rendered abortive by court order.
Always check what is not included in the absentee freeholder indemnity insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?
Absentee Freeholder Indemnity Insurance has limitations - Supplemental considerations
Absentee Freeholder insurance may satisfy lenders such as Bank of Scotland or Leeds Building Society and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner. Information contained within this webpage is for general information for conveyancers and solicitors in England and Wales on the the lender approved panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender 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 freeholder Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The above information is in relation to properties in England and Wales.