Indemnity Insurance of Absentee Landlord Bank conveyancing instructions
Chelsea BS and Coventry BS, as with many lenders, have their own requirements when it comes to absentee landlord indemnity insurance. The content herein aims to help conveyancing solicitors on the various mortgage company approved list of panel lawyers where the title to be charged incorporates absentee landlord. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, be it Accord, Barnsley BS or Bank of Scotland. The information on this page Is not to be read as absentee landlord indemnity insurance advice.
Need help with absentee landlord indemnity insurance from your lender?
In your capacity as a solicitor on a bank panel you must disclose 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 bank are to lend, they may require absentee landlord indemnity policy. In some conveyancing transactions a buyer or bank might accept an absent landlord indemnity insurance 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 |
|---|---|
| Accord Mortgages | 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. |
| Darlington Building Society | Yes, but refer individual cases prior to submitting Certificate of Title |
| Landbay Partners | Yes, if the title remains good and marketable and you are satisfied that such indemnity insurance covers all associated risks and you are able to issue an unqualified title certificate. |
| M&S Bank | Yes indemnity insurance is acceptable. we will also require you to make a retention equivalent to 6 (six) years ground rent |
| NRAM Ltd | If there is an absentee landlord we are prepared to proceed upon confirmation that the position is accepted by practitioners in the locality and provided the landlord is not obliged by the terms of the lease to maintain, repair and insure any common services or to enforce such obligations against a third party. In the case of insolvent landlords refer to 11.1a. |
| 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 Insurance is typically needed when the freeholder or landlord of land or residence is insolvent, unresponsive or where Bona Vacantia applies in relation to removed companies. This results in an inability to pay ground rent and seek permission to lease assignments and alterations to the residence. The loss arises because the landlord may request ground rent or try to forfeiture of the lease claiming breach of covenant should they subsequently appear.
Barclays and Halifax like the majority of lenders, requirements are that where absentee landlord indemnity insurance is to be taken out:
- your firm must send a duplicate 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 further lending against the security of the property
- your firm is duty bound to explain to the mortgagor that the borrower is obliged to comply with any conditions of the absentee landlord indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the policy
- the absentee landlord indemnity insurance policy must not incorporate conditions that you are aware would invalidate or compromise the interests of the mortgage company
- your firm are responsible for approving the terms of the absentee landlord policy on behalf of the bank
- the minimum level of cover for the policy must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
- the absentee landlord indemnity insurance policy must be placed on risk at no cost to the lender
- you is obliged to reveal to the insurer all relevant information which you have obtained
- the absentee landlord indemnity insurance policy should always be for the benefit of the mortgage company and, wherever possible, for the benefit of the mortgagor and any next registered proprietor or mortgage company. If the mortgagor will not be protected by the absentee landlord indemnity insurance policy, the mortgagor should be advised accordingly.
| 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 Scotland | Not less than mortgage advance plus 10% |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Halifax Loans | 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. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| Lloyds | The value of the property. |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| 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. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Perenna | The higher of the purchase price or valuation. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| Whistletree | The value of the property |
General Absentee Landlord indemnity insurance points to consider
The extent of the terms for absentee landlord indemnity insurance are shown in the policy document. Conveyancing Practitioners should point your non-lender client to the absentee landlord indemnity insurance policy document. Absentee Landlord Contingency insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so you should check any draft to ensure it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the absentee landlord indemnity insurance policy. Again, please check that this is as you expected.Absentee Landlord indemnity insurance: Important 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 Landlord indemnity insurance Policies should be checked for the following- All sums paid with the written consent of the insurance company to free the property from the risks specified in the absentee landlord insurance.
- 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.
- 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 policy, 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 insurance.
- Liability for damages or compensation incurred in any action in respect of the risks specified in the absentee landlord policy, including solicitors charges.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
Due diligence should extend to checking that the answers on the application form are correct. Regardless of how remote a claim on the mortgage company 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 paid out.
Supplemental considerations for absentee landlord indemnity insurance
There may be consequences arising from the enforcement of the risks identified in the absentee landlord policy which are not adequately covered by financial compensation. Content on this webpage is for general information for conveyancers and solicitors in England and Wales on the the bank 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 above information covers to properties in England and Wales.