Bank conveyancing panel conditions re Absentee Landlord Indemnity Insurance
Godiva Mortgages and Accord, like many banks, set their own requirements when it comes to absentee landlord indemnity insurance. This page sets out to enlighten residential conveyancing solicitors on the different bank solicitors panel where the title to be charged contains absentee landlord. Lawyers are advised to familiarise themselves with the CML handbook requirements for each mortgage company, for example Santander, Birmingham Midshires or Skipton. The content on this page is not focused on absentee landlord indemnity insurance requirements.
Need help with absentee landlord indemnity insurance from your lender?
In your capacity as a solicitor on a bank panel you must report to the lender (see PII of the UK Finance Lenders’ Handbook) if it becomes apparent that the landlord is either missing or insolvent. If the mortgage company are to lend, they may ask you to take out missing landlord indemnity policy. In some conveyancing matters a purchaser or bank might accept an absent landlord 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 landlord is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Britannia | Yes |
| Chelsea 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. |
| Habito | Yes. Provided that you are satisfied that the insurance will make the title good and marketable. |
| LendInvest | Yes. However, your attention is drawn to 9.1 below. You must be satisfied that the insurance will make the title good and marketable and you can give an unqualified Certificate of Title. |
| Lloyds | Indemnity insurance is required if we agree to lend. |
| Market Harborough Building Society | No |
| Reliance Bank | Yes |
About Absentee Landlord Indemnity Insurance
Many conveyancing practitioner across the country regularly rely on missing landlord insurance to help move the conveyancing process when the freeholder or landlord of land or property is insolvent, unresponsive or where the company is no longer in existence. This impacts the ability to pay ground rent and obtain consent to lease assignments and alterations to the property. The loss arises because the landlord may request ground rent or try to forfeiture of the lease on the basis of breach of covenant should they subsequently emerge.
Yorkshire Building Society and Bank of Scotland as with the majority of mortgage companies, requirements are that where absentee landlord indemnity insurance is to be put on risk:
- your firm must provide a duplicate of the absentee landlord indemnity insurance to the mortgagor and explain to the borrower why the absentee landlord indemnity insurance policy was effected and that additional insurance might be mandatory if there is supplemental lending against the security of the property
- the absentee landlord indemnity insurance policy should not contain terms which you are aware would invalidate or compromise the interests of the lender
- your firm is required to disclose to the insurer all relevant information which you have obtained
- the limit of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- the absentee landlord indemnity insurance policy should be effected at no cost to the bank
- you must approve the terms of the absentee landlord policy on behalf of the bank
- the absentee landlord indemnity insurance policy must be in favor of the bank and, if possible, for the benefit of the borrower and any next owner or lender. If the mortgagor will not be protected by the absentee landlord indemnity insurance policy, you must advise the borrower of this fact.
- your practice is duty bound to point out to the borrower that the borrower is obliged to adhere to any conditions of the absentee landlord indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the policy
| Lender | Requirement |
|---|---|
| Britannia | Cover to the full value of the property. |
| Chelsea 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. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Habito | Higher of purchase price or valuation |
| JPMorgan | 110% of principal sum. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| LendInvest | An amount at least equal to the valuation of the property. |
| Lloyds | The value of the property. |
| Lloyds TSB Scotland | The value of the property |
| Magellan Homeloans | At least equal to the value of the property |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| NRAM Ltd | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| National Westminster Bank | An amount equal to the value of the property. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Reliance Bank | \xA31,000,000.00 |
| Scottish Building Society | Amount of mortgage plus 25%. |
| 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. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| RBS - Virgin One | An amount equal to the value of the property. |
General Absentee Landlord indemnity insurance points to consider
The full terms, conditions and exclusions for absentee landlord indemnity insurance are set out in the policy paperwork. Conveyancing solicitors should point your non-lender client to the absentee landlord indemnity insurance policy document. Absentee Landlord indemnity insurance is designed to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to ensure it is correct. The duration 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.Significant aspects and benefits of absentee landlord Contingency insurance :
Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Absentee Landlord indemnity insurance Cover normally includes- Loss in market value due to the successful enforcement of the risks specified in the absentee landlord insurance.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the absentee landlord insurance, including solicitors charges.
- All sums paid with consent in writing from the insurance company to liberate the property from the risks specified in the absentee landlord indemnity insurance.
- 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.
- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the absentee landlord policy, to the extent that such costs are rendered abortive by court order.
Due diligence should extend to checking that the answers on the application form are accurate. Regardless of how remote a claim on the bank insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly before any claim is paid out.
Absentee Landlord Indemnity Insurance has limitations - Additional considerations
Absentee Landlord Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that absentee landlord indemnity cover will not necessarily be the right solution.The above information is in relation to properties in England and Wales.