Lender conveyancing panel requirements re Absentee Landlord Indemnity Insurance
Bank of Scotland and Birmingham Midshires, like the majority of banks, have their own specific instructions when it comes to absentee landlord indemnity insurance. This page sets out to enlighten conveyancing firms on the various mortgage company approved list of panel lawyers where the title to be charged includes absentee landlord. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each lender, for example RBS, Lloyds TSB or Barclays. 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 solicitor on a lender panel you must report to the mortgage company (see PII 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 accept missing landlord indemnity policy. In some conveyancing matters a purchaser or lender 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 lender accept indemnity insurance if the landlord is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| Coutts Finance | No, but may be accepted with our prior written approval. Please refer individual cases. See 1.11 |
| Fleet Mortgages | Yes. However, your attention is drawn to 9.1 below. |
| National Westminster Bank | Yes |
| Platform | Yes. |
| Saffron Building Society | Yes - subject to the terms of Section 9 of Part 1 of the Handbook, and the policy being for our benefit and the benefit of our Transferees |
| RBS - Virgin One | Yes. |
| Ulster Bank | Yes. |
About Absentee Landlord Indemnity Insurance
Absentee Landlord Cover is normally required when the freeholder or landlord of land or property is insolvent, missing or where Bona Vacantia applies in relation to defunct companies. This impacts the ability 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 attempt forfeiture of the lease claiming breach of covenant should they subsequently re-appear.
Yorkshire Bank Home Loans and Coventry BS in common with most banks, instructions are such that where absentee landlord indemnity insurance is to be taken out:
- your firm are responsible for approving the terms of the absentee landlord policy on behalf of the mortgage company
- the absentee landlord indemnity insurance policy must not contain conditions that you know would void or compromise the interests of the lender
- the absentee landlord indemnity insurance policy should always be in favor of the lender and, wherever possible, in favour of the borrower and any next owner or mortgagee. Where the mortgagor will not be protected by the absentee landlord indemnity insurance policy, the mortgagor needs to be informed accordingly.
- the absentee landlord indemnity insurance policy should be effected at no charge to the lender
- your firm must supply 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 additional insurance might be required if there is further borrowing against the security of the property
- the level of indemnity must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
- your firm must 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 lender of any notice or potential claim in respect of the insurance
- your firm must disclose to the insurer all relevant information which you have gathered
| Lender | Requirement |
|---|---|
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| 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. |
| Platform | 110% of principal sum. |
| Saffron Building Society | Higher of purchase price or valuation. 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). |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| TSB | The value of the property |
| RBS- First Active | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
| RBS - Virgin One | An amount equal to the value of the property. |
| Ulster Bank | An amount equal to the value of the property. |
| 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 are obliged to direct your non-lender client to the absentee landlord indemnity insurance policy itself. The intention of absentee landlord indemnity insurance is to grant 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 lifetime of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.Important characteristics 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 Policies should be checked for the following- Reimbursement for compensation incurred in any action concerning the risks specified in the absentee landlord indemnity insurance, including fees of a legal nature.
- Market value reduction resulting from the successful enforcement of the risks specified in the absentee landlord indemnity insurance.
- All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the absentee landlord insurance.
- Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, before the commencement of 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.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- 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.
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the absentee landlord policy will be invalidated.
Absentee Landlord Indemnity Insurance has limitations - Further considerations
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.