Absentee Landlord Indemnity Insurance Mortgage Company conveyancing requirements
Lloyds TSB and Yorkshire Bank Home Loans, in common with many mortgage companies, have their own specific instructions when it comes to absentee landlord indemnity insurance. The purpose of this page to assist conveyancing solicitors on the different lender conveyancing panel where the title to be charged contains absentee landlord. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each bank, whether it be Skipton, RBS or Natwest. 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 conveyancing lawyer on a mortgage company panel you must disclose to the bank (see Section two of the UK Finance Lenders’ Handbook) if it becomes apparent that the landlord is either absent or insolvent. If the lender are to lend, they may demand missing landlord indemnity policy. In some conveyancing matters a purchaser or bank might accept a missing landlord indemnity insurance 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 |
|---|---|
| Aldermore Bank | Yes, subject to the requirements of Section 9 of Part 1 being met and the policy being for our benefit and the benefit of our Transferees. Yes, provided the conveyancer is satisfied and confirm that the insurance provides an adequate solution to the issue identified, including issues of unknown restrictive covenants, and an unqualified certificate of title can be provided |
| Barnsley 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. |
| Bradford & Bingley | Yes |
| Co operative Bank | Yes, subject to the requirements of section 9 being met. |
| Cynergy Bank | We will consider on a case by case basis. |
| Harpenden Building Society | No |
| Santander | We may accept indemnity insurance but the matter must be referred to the Mortgage Operations office instructing you for confirmation that indemnity insurance is acceptable and for details of any additional requirements. |
About Absentee Landlord Indemnity Insurance
Absentee Landlord Cover is typically needed when the freeholder or landlord of land or residence is insolvent, missing or where Bona Vacantia applies in relation to removed companies. This results in an inability to pay ground rent and obtain permission 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 grounds of breach of covenant should they subsequently surface.
Nationwide and Virgin Money in common with many lenders, instructions are such that where absentee landlord indemnity insurance is effected:
- your practice must approve the terms of the absentee landlord policy on behalf of the lender
- the level of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- your practice must disclose to the insurer all relevant information which you have acquired
- you is duty bound to spell out to the mortgagor that the borrower is obliged to comply with any conditions of the absentee landlord indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the policy
- the absentee landlord indemnity insurance policy should not contain terms which you know would invalidate or prejudice the interests of the bank
- the absentee landlord indemnity insurance policy should be placed on risk without cost to the mortgage company
- the absentee landlord indemnity insurance policy should always be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any subsequent registered proprietor or bank. Where the borrower will not be protected by the absentee landlord indemnity insurance policy, the borrower should be informed accordingly.
- you must supply 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 a further policy could be necessary if there is further lending against the security of the property
| Lender | Requirement |
|---|---|
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). |
| Barclays plc | Higher of purchase price or valuation |
| 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. |
| Bradford & Bingley | Amount of loan + 15% |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Cynergy Bank | The market value of the property. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Harpenden Building Society | 110% of mortgage advance |
| Hinckley and Rugby | The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest. |
| Investec | The open market value of the property according to the valuation report. |
| Lloyds | The value of the property. |
| Masthaven Bank | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Metro Bank | The open market value of the property according to the valuation report. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| Royal Bank of Scotland | 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 identified in the policy document. Conveyancing Practitioners should direct your non-lender client to the absentee landlord indemnity insurance policy paperwork. The intention of absentee landlord indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so you should check the document to ensure it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the absentee landlord indemnity insurance policy. It is well worth checking that the time frame is correct.Absentee Landlord indemnity insurance: Important characteristics and benefits:
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 Policies are likely to cover the following- The cost of works (including professional fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the absentee landlord indemnity insurance, to the extent that such costs are rendered abortive by court decision.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Loss in market value resulting from 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.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the absentee landlord insurance, including legal and associated costs.
- Money paid with the written consent of the insurance company to free the land from the risks specified in the absentee landlord policy.
Always consider what is excluded from the absentee landlord policy e.g. does the policy cover any property that has been altered within the year prior to the commencement of the policy? Does it cover legal costs?
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. Information provided on this webpage is for general information for Regulated law firms 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 bank 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.