Absentee Freeholder Indemnity Insurance Bank conveyancing requirements
Birmingham Midshires and HSBC, in common with the majority of lenders, set their own requirements when it comes to absentee freeholder indemnity insurance. This page is designed to help property law solicitors on the various mortgage company solicitors panel where the title to be charged includes absentee freeholder. It is not a alternative for checking the CML handbook requirements for each bank, whether it be Lloyds TSB, RBS or Nationwide. The content on this page is not focused on absentee freeholder indemnity insurance requirements.
Need help with absentee freeholder indemnity insurance from your lender?
Being a solicitor on a mortgage company panel you must disclose to the mortgage company (see Part 2 of the UK Finance Lenders’ Handbook) if it becomes apparent that the freeholder is either missing or insolvent. If the bank are to lend, they may insist on missing freeholder indemnity policy. Lenders’ approach is changing however and an increased number of lenders have changed their requirements on the minimum lease term before they are prepared to lend. LENDER monitor has noted a changing attitude towards to missing freeholder insurance. Variousmortgage companies previously stated that, they would have lent on an absentee freeholder, whereas they will no longer do so. 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 |
|---|---|
| Aldermore Bank | |
| Bradford & Bingley | |
| Mortgage Agency Services | |
| Scottish Building Society | |
| RBS - Direct Line One | |
| RBS (One Account) | |
| Virgin |
About Absentee freeholder Indemnity Insurance
Many solicitor across the UK regularly rely on absentee freeholder insurance to help move the conveyancing process when the freeholder or freeholder of land or property is insolvent, missing or where Bona Vacantia applies in relation to removed companies. This impacts the ability to pay ground rent and obtain consent to lease assignments and alterations to the residence. The potential loss is that the freeholder may request ground rent or try to forfeiture of the lease claiming breach of covenant should they subsequently appear.
Yorkshire Bank Home Loans and Halifax as with the majority of mortgage companies, obligations require that where absentee freeholder indemnity insurance is effected:
- the absentee freeholder indemnity insurance policy must not incorporate conditions which you are aware would void or prejudice the interests of the lender
- the absentee freeholder indemnity insurance policy must be effected without charge to the lender
- you are responsible for approving the terms of the absentee freeholder policy on behalf of the bank
- you is required to reveal to the insurer all relevant information which you have gathered
- the limit of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- you must explain to the mortgagor that the borrower is obliged to comply with any conditions of the absentee freeholder indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the insurance
- your firm must send a copy of the absentee freeholder indemnity insurance to the mortgagor and explain to the borrower why the absentee freeholder indemnity insurance policy was effected and that a further policy might be mandatory if there is additional borrowing against the security of the property
- the absentee freeholder indemnity insurance policy must be for the benefit of the mortgage company and, wherever possible, in favour of the borrower and any next registered proprietor or mortgagee. If the mortgagor will not be protected by the absentee freeholder indemnity insurance policy, the mortgagor should be informed accordingly.
| Lender | Requirement |
|---|---|
| Aldermore Bank | |
| Bank of China | |
| Better HomeOwnership | |
| Bluestone Mortgages | |
| Bradford & Bingley | |
| Britannia | |
| Danske Bank | |
| Intelligent Finance | |
| Kensington Mortgage | |
| Market Harborough Building Society | |
| Masthaven Bank | |
| Mortgage Agency Services | |
| Rooftop Mortgages | |
| Scottish Building Society | |
| Tandem Bank | |
| RBS - Direct Line One | |
| RBS (One Account) | |
| Together Personal Finance | |
| Virgin | |
| Whistletree |
Non lender-specific considerations
The extent of the terms for absentee freeholder indemnity insurance are identified in the policy paperwork. Conveyancing solicitors should direct your non-lender client to the absentee freeholder indemnity insurance policy document. Absentee Freeholder Contingency insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to determine that it is as it should be. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the absentee freeholder indemnity insurance policy. Adequacy in this regard should be checked.Absentee Freeholder Contingency insurance: Significant characteristics 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- Reimbursement for compensation incurred in any proceedings in respect of the risks specified in the absentee freeholder insurance, including legal and associated costs.
- Expenses for works (including professional fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the absentee freeholder insurance, to the extent that such costs are rendered abortive by court order.
- All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the absentee freeholder policy.
- Market value reduction due to the successful enforcement of the risks specified in the absentee freeholder insurance.
- 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.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
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.
Further considerations for absentee freeholder indemnity insurance
Absentee Freeholder insurance may satisfy lenders such as Coventry BS or Accord 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.The content set out above covers to properties in England and Wales.