Absentee Landlord Indemnity Insurance Lender conveyancing requirements
Barclays and Santander, as with the majority of banks, dictate their own requirements when it comes to absentee landlord indemnity insurance. The purpose of this page to assist property law practitioners on the various lender approved list of panel lawyers where the title to be charged incorporates absentee landlord. It is not a alternative for checking the CML handbook requirements for each bank, be it Barnsley BS, Virgin Money or RBS. 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?
Being a solicitor on a lender panel you must report to the bank (see Section two of the UK Finance Lenders’ Handbook) if it comes to your attention that the landlord is either absent or insolvent. If the bank are to lend, they may demand absentee landlord indemnity insurance. In some conveyancing matters a buyer or mortgage company might accept an absent landlord indemnity policy but many purchasers or lenders will not be willing to move forward. 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 |
|---|---|
| Allied Irish Bank | Refer to AIB Group (UK) plc, Central Securities (GB), 92 Anne Street, Belfast, BT1 3H |
| Atom Bank | Yes, provided you are satisfied that such insurance is fully comprehensive and 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. |
| 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. |
| Family Building Society | Yes. |
| Investec | Yes, if fully comprehensive. |
| 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. |
| RBS - Direct Line One | Yes. |
About Absentee Landlord Indemnity Insurance
Many conveyancer throughout the country regularly rely on missing landlord insurance to help move the conveyancing process when the freeholder or landlord of land or residence is insolvent, missing or where the company is no longer in existence. This impacts the ability to pay ground rent and seek consent to lease assignments and alterations to the premises. The potential loss is that the landlord may request ground rent or seek forfeiture of the lease claiming breach of covenant should they subsequently re-appear.
Coventry BS and Yorkshire Bank Home Loans as with the majority of mortgage companies, instructions are such that where absentee landlord indemnity insurance is to be put on risk:
- you must approve the terms of the absentee landlord policy on behalf of the mortgage company
- your practice is required to reveal to the insurer all relevant information which you have gathered
- the absentee landlord indemnity insurance policy needs to be in favor of the lender and, wherever possible, for the benefit of the borrower and any future registered proprietor or mortgage company. If the borrower will not be covered by the absentee landlord indemnity insurance policy, the borrower must be informed accordingly.
- the absentee landlord indemnity insurance policy must be effected without expense to the lender
- your firm must explain to the borrower that the borrower must adhere to any conditions of the absentee landlord indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in relation to the policy
- the absentee landlord indemnity insurance policy must not contain terms that you know would void or compromise the interests of the bank
- you must send a copy of the absentee landlord indemnity insurance to the borrower and explain to the mortgagor why the absentee landlord indemnity insurance policy was effected and that additional insurance might be required if there is further borrowing against the mortgaged property
- the limit of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Aviva Equity Release | Full value of the property. |
| Birmingham Bank | Please contact Head of Operations to discuss (Gareth Allen) |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| 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. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Investec | The open market value of the property according to the valuation report. |
| Leeds Building Society | An amount at least equal to the amount of the mortgage advance plus 10%. Any indemnity insurance policy must protect the borrowers, any successor in title and any Mortgagee. |
| Metro Bank | The open market value of the property according to the valuation report. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| 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. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| RBS - Direct Line One | An amount equal to the value of the property. |
| RBS (One Account) | 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 explained in the policy document. Conveyancing Practitioners are obliged to direct the borrower to the absentee landlord indemnity insurance policy itself. Absentee Landlord Contingency insurance is designed to provide indemnity in respect of the risks set out in the policy schedule - so you should check the document to ensure it is in order. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Absentee Landlord Contingency insurance: Important characteristics and benefits:
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the absentee landlord indemnity insurance schedule. Absentee Landlord indemnity insurance Policies are likely to cover the following- Expenses for 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 landlord insurance, to the extent that such costs are rendered abortive by court decision.
- All sums paid with the written consent of the insurance company to free the land from the risks specified in the absentee landlord insurance.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the absentee landlord policy, including solicitors charges.
- Diminution in value due to the successful enforcement of the risks specified in the absentee landlord insurance.
- The cost 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.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
Due diligence should extend to checking that the answers on the application form are correct. 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 very carefully prior to any claim being met.
Further considerations for absentee landlord indemnity insurance
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. Content 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 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 landlord Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The content set out above covers to properties in England and Wales.