Absentee Freeholder Indemnity Insurance Bank conveyancing requirements
Bank of Scotland and Accord, in common with the majority of lenders, have their own requirements when it comes to absentee freeholder indemnity insurance. The content herein aims to help property law solicitors on the various mortgage company conveyancing panel where the title for the the property to be mortgaged contains absentee freeholder. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, for example Godiva Mortgages, Lloyds TSB 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?
As a property lawyer on a mortgage company panel you must report to the mortgage company (see Part 2 of the UK Finance Lenders’ Handbook) if it comes to your attention that the freeholder is either absent or insolvent. If the bank are to lend, they may insist on absentee freeholder indemnity insurance. In some conveyancing matters a purchaser or lender might accept an absent freeholder indemnity policy but many purchasers or lenders will not accept this as a solution. See 5.14.15 to see if the bank accept indemnity insurance if the freeholder is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Bank of Scotland | Yes, subject to the requirements of section 9 being met |
| Kensington Mortgage | Yes subject to the requirements of Section 9 of Part 1 being met and the policy being the benefit of us, our transferees and our assignees. |
| 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. |
| RBS - Direct Line | Yes. |
| RBS (One Account) | Yes. |
| Ulster Bank | Yes. |
| Virgin | No. Instead refer to: Mortgage Processing Operations Virgin Money Gosforth Newcastle upon Tyne NE3 4PL Solicitor Helpline: 0845 604 4858 Solicitor Email: postoffer@virginmoney.com If the landlord is absent, we'll lend if you confirm: - that the position is accepted by practitioners in the local area of the property; and - the landlord isn't required by the lease to maintain, repair or insure any common areas/services or to enforce such obligations against 3rd parties. |
About Absentee freeholder Indemnity Insurance
Many conveyancer throughout the UK regularly rely on absentee freeholder insurance to help move the conveyancing process when the freeholder or freeholder of land or premises is insolvent, unresponsive or where the company is no longer in existence. This impacts the ability to pay ground rent and obtain permission to lease assignments and alterations to the property. The loss arises because the freeholder may request ground rent or attempt forfeiture of the lease alleging breach of covenant should they subsequently emerge.
Natwest and Leeds Building Society like most lenders, obligations require that where absentee freeholder indemnity insurance is to be put on risk:
- your practice is required to disclose to the insurer all relevant information which you have obtained
- the limit of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your practice must supply a copy 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 could be mandatory if there is supplemental borrowing against the security of the property
- the absentee freeholder indemnity insurance policy needs to be for the benefit of the bank and, wherever possible, in favour of the borrower and any next owner or lender. Where the borrower will not be covered by the absentee freeholder indemnity insurance policy, the mortgagor needs to be advised accordingly.
- 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 without cost to the lender
- your practice is duty bound to point out to the mortgagor that the borrower is obliged to comply with any conditions of the absentee freeholder indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the policy
- the absentee freeholder indemnity insurance policy should not contain conditions that you are aware would invalidate or prejudice the interests of the lender
| Lender | Requirement |
|---|---|
| Accord Mortgages | 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. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Clydesdale Bank | Open market value of property. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Harpenden Building Society | 110% of mortgage advance |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| Magellan Homeloans | At least equal to the value of the property |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Perenna | The higher of the purchase price or valuation. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| 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. |
| RBS - Direct Line | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
| Ulster Bank | An amount equal to the value of the property. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
Non lender-specific considerations
The full terms, conditions and exclusions for absentee freeholder indemnity insurance are set out in the policy document. Conveyancing Practitioners are obliged to point the borrower to the absentee freeholder indemnity insurance policy itself. Absentee Freeholder indemnity insurance is designed to provide indemnity in respect of the risks specified in the policy schedule - so it’s important to check the schedule to determine that it is in order. 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.Absentee Freeholder Contingency insurance: Important aspects 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. Absentee Freeholder indemnity insurance Cover normally includes- Loss in market value due to the successful enforcement of the risks specified in the absentee freeholder policy.
- All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the absentee freeholder policy.
- Cover for compensation incurred in any proceedings in respect of the risks specified in the absentee freeholder insurance, as well as legal and associated costs.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- 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.
- The cost of works (including professional fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the absentee freeholder policy, to the extent that such costs are rendered abortive by court decision.
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the absentee freeholder policy will not be valid.
Absentee Freeholder Indemnity Insurance has limitations - Additional considerations
Absentee Freeholder insurance may satisfy lenders such as Yorkshire Building Society or Barclays 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 provided on this webpage is for general information for conveyancers and solicitors in England and Wales on the the lender solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the bank 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.