Bank conveyancing panel requirements re Absentee Landlord Indemnity Insurance
Natwest and Coventry BS, in common with many lenders, dictate their own requirements when it comes to absentee landlord indemnity insurance. The purpose of this page to assist property law solicitors on the different bank approved list of panel lawyers where the title for the the property to be mortgaged incorporates absentee landlord. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, be it RBS, Lloyds TSB or Leeds Building Society. 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 conveyancing practitioner 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 absentee landlord indemnity policy. Lenders’ approach is changing however and an increased number of mortgage companies have changed their requirements on the minimum lease term before they are prepared to lend. LENDER monitor has noted a changing attitude towards to absentee landlord insurance. Numerousmortgage companies previously stated that, they would have lent on an absentee landlord, whereas they will no longer do so. 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 |
|---|---|
| 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. |
| Aviva Equity Release | Yes |
| Birmingham Midshires | Yes, subject to the requirements of section 9 being met. |
| Britannia | Yes |
| Godiva Mortgages | Yes. Provided that you are satisfied that the insurance will make the title good and marketable. |
| ModaMortgages | We only lend if (a) there are six or less flats in the building and (b) appropriate indemnity insurance covering the issue is in place. A copy of the insurance policy should be submitted via email to completions@modamortgages.co.uk. Please include the Mortgage Reference Number which is on the first page of the Mortgage Offer. |
| Vida Homeloans | Vida Homeloans may accept indemnity insurance if the landlord is absent or insolvent, provided: • It meets our requirements in section 9, • There are 6 or less flats in the building, and • You must be satisfied that the insurance will make the title good and marketable and you can give an unqualified Certificate of Title |
About Absentee Landlord Indemnity Insurance
Missing Landlord Insurance is normally needed when the freeholder or landlord of land or residence is insolvent, absent or where Bona Vacantia applies in relation to defunct companies. This impacts the ability to pay ground rent and seek consent to lease assignments and alterations to the premises. The loss arises because the landlord may request ground rent or take action for forfeiture of the lease on grounds of breach of covenant should they subsequently emerge.
Yorkshire Bank Home Loans and Bank of Scotland in common with many mortgage companies, instructions are such that where absentee landlord indemnity insurance is to be put on risk:
- the absentee landlord indemnity insurance policy must be placed on risk at no charge to the mortgage company
- your firm is obliged to reveal to the insurer all relevant information which you have obtained
- your practice 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 could be required if there is further lending against the mortgaged property
- the level of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- the absentee landlord indemnity insurance policy must not contain conditions which you are aware would invalidate or compromise the interests of the mortgage company
- the absentee landlord indemnity insurance policy must be in favor of the mortgage company and, if possible, in favour of the mortgagor and any future registered proprietor or mortgage company. Where the borrower will not be protected by the absentee landlord indemnity insurance policy, the borrower should be advised accordingly.
- your firm are responsible for approving the terms of the absentee landlord policy on behalf of the mortgage company
- your practice is duty bound to 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 bank of any notice or potential claim in relation to the insurance
| Lender | Requirement |
|---|---|
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Aviva Equity Release | Full value of the property. |
| Barclays plc | Higher of purchase price or valuation |
| Birmingham Bank | Please contact Head of Operations to discuss (Gareth Allen) |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Britannia | Cover to the full value of the property. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Godiva Mortgages | Minimum of the value of the property. |
| Halifax | An amount at least equal to the mortgage advance. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| Magellan Homeloans | At least equal to the value of the property |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Pepper Money | An amount equal to at least 110% of 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 and also the borrower(s). |
| Platform | 110% of principal sum. |
| RBS - Virgin One | An amount equal to the value of the property. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| Yorkshire 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. |
General Absentee Landlord indemnity insurance points to consider
The extent of the terms for absentee landlord indemnity insurance are set out in the policy paperwork. Conveyancing solicitors should 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 specified in the policy schedule - so you should check the schedule to determine that it is in order. The continuance 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.Important features and benefits of absentee landlord Contingency insurance :
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 Cover normally includes- Money paid with the written consent of the insurance company to liberate the land from 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 legal and associated costs.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Expenses for works (including architects’ and surveyors’ 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 insurance, to the extent that such costs are rendered abortive by court order.
- The cost 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.
- Loss in market value resulting from the successful enforcement of the risks specified in the absentee landlord policy.
Due diligence should extend to checking that the answers on the application form are accurate. However remote the likelihood of a claim on the lender insurance policy might be you can rest assured that the insurer will check the details on any proposal form thoroughly prior to any claim being paid out.
Further considerations for absentee landlord indemnity insurance
There may be consequences arising from the enforcement of the risks identified in the absentee landlord insurance which are not adequately covered by financial compensation.The content set out above is in relation to properties in England and Wales.