Absentee Landlord Indemnity Insurance Lender conveyancing requirements
Virgin Money and Bank of Scotland, as with most mortgage companies, have their own specific instructions when it comes to absentee landlord indemnity insurance. The content herein aims to help conveyancing solicitors on the numerous mortgage company conveyancing panel where the title for the the property to be mortgaged incorporates absentee landlord. It is not a substitute for checking the CML handbook requirements for each lender, whether it be Halifax, Chelsea BS or Skipton. The content on this page Is not to be read as absentee landlord indemnity insurance advice.
Need help with absentee landlord indemnity insurance from your lender?
As a conveyancing practitioner on a mortgage company panel you must notify to the mortgage company (see Part 2 of the UK Finance Lenders’ Handbook) if it becomes apparent that the landlord is either missing or insolvent. If the lender are to lend, they may insist on missing landlord indemnity insurance. Lenders’ approach is changing however and an increased number of banks have tightened their requirements on the minimum lease term before they are prepared to lend. LENDER monitor has noted a changing attitude towards to absentee landlord insurance. A number of lendersmortgage companies previously stated that, they would have lent on an missing landlord, whereas they will no longer do so. See 5.14.15 to see if the mortgage company accept indemnity insurance if the landlord is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Bank of Ireland Mortgages | Only if such insurance covers us in the event of a failure to insure or repair the common parts and services. |
| Clydesdale Bank | Yes, if the requirements of section 9 are met. |
| Hodge Equity Release | 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. |
| Lloyds | Indemnity insurance is required if we agree to lend. |
| 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. |
| Whistletree | Yes, Indemnity Insurance is required |
About Absentee Landlord Indemnity Insurance
Missing Landlord Cover is typically needed when the freeholder or landlord of land or premises 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 premises. The loss arises because the landlord may request ground rent or take action for forfeiture of the lease claiming breach of covenant should they subsequently emerge.
HSBC and RBS like most banks, obligations require that where absentee landlord indemnity insurance is to be put on risk:
- the absentee landlord indemnity insurance policy should always be in favor of the bank and, if possible, in favour of the borrower and any next registered proprietor or mortgagee. If the borrower will not be protected by the absentee landlord indemnity insurance policy, the borrower must be advised accordingly.
- the limit of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your practice is duty bound to spell out to the mortgagor that the borrower will need to comply with any conditions of the absentee landlord indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the policy
- the absentee landlord indemnity insurance policy must not incorporate terms which you know would invalidate or prejudice the interests of the bank
- the absentee landlord indemnity insurance policy must be placed on risk at no charge to the bank
- your firm are responsible for approving the terms of the absentee landlord policy on behalf of the mortgage company
- your practice must send a copy of the absentee landlord indemnity insurance to the borrower and explain to the borrower why the absentee landlord indemnity insurance policy was effected and that a further policy might be necessary if there is supplemental borrowing against the mortgaged property
- you must reveal to the insurer all relevant information which you have obtained
| Lender | Requirement |
|---|---|
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| 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 Bank | completions@birminghambank.com |
| Clydesdale Bank | Open market value of property. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| 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. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| Lloyds | The value of the property. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Precise Mortgages | An amount at least equal to 110% of the mortgage 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. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
| Whistletree | The value of the property |
Non lender-specific considerations
The extent of the terms for absentee landlord indemnity insurance are identified in the policy paperwork. Property lawyers should point your non-lender client to the absentee landlord indemnity insurance policy paperwork. Absentee Landlord Contingency insurance is devised to provide indemnity in respect of the risks specified in the policy schedule - so you should check the schedule to ensure it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the absentee landlord indemnity insurance policy. Adequacy in this regard should be checked.Absentee Landlord 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 Landlord 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 landlord indemnity insurance.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- 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 absentee landlord insurance, to the extent that such costs are rendered abortive by court order.
- Diminution in value due to the successful enforcement of the risks specified in the absentee landlord policy.
- The out of pocket expenses 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.
- Cover for compensation incurred in any action concerning the risks specified in the absentee landlord indemnity insurance, as well as solicitors charges.
Due diligence should extend to checking that the answers on the application form are accurate. However remote the likelihood of a claim on the bank insurance policy might be you can certain that the insurer will check the details on any proposal form very carefully before any claim is admitted.
Additional considerations for absentee landlord indemnity insurance
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from absentee landlord insurance may be adequate for your client.The content set out above is in relation to properties in England and Wales.