Bank conveyancing panel conditions re Absentee Landlord Indemnity Insurance
Santander and Coventry BS, like most mortgage companies, have their own requirements when it comes to absentee landlord indemnity insurance. This page is designed to help conveyancing firms on the various mortgage company conveyancing panel where the title to be charged contains absentee landlord. Solicitors should still check the CML handbook requirements for each bank, whether it be Bank of Scotland, Barclays or Yorkshire Bank Home Loans. The information on this page is not focused on absentee landlord indemnity insurance requirements.
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 absent or insolvent. If the bank are to lend, they may require absentee landlord indemnity policy. In some conveyancing matters a purchaser or lender might accept a missing landlord indemnity policy but many buyers or lenders will not accept this as a solution. 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 |
|---|---|
| Habito | Yes. Provided that you are satisfied that the insurance will make the title good and marketable. |
| Harpenden Building Society | No |
| JPMorgan | Refer to office issuing Mortgage Instructions. |
| 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. |
| Reliance Bank | 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 - Direct Line | Yes. |
About Absentee Landlord Indemnity Insurance
Missing Landlord Insurance is typically needed when the freeholder or landlord of land or property is insolvent, absent or where Bona Vacantia applies in relation to removed companies. This results in an inability to pay ground rent and seek consent to lease assignments and alterations to the property. The loss arises because the landlord may request ground rent or take action for forfeiture of the lease alleging breach of covenant should they subsequently appear.
Chelsea BS and RBS like many lenders, instructions are such that where absentee landlord indemnity insurance is to be put on risk:
- the absentee landlord indemnity insurance policy must be for the benefit of the bank and, if possible, in favour of the borrower and any subsequent registered proprietor or lender. If the borrower will not be protected by the absentee landlord indemnity insurance policy, the borrower should be advised accordingly.
- the absentee landlord indemnity insurance policy must not incorporate terms that you know would void or prejudice the interests of the lender
- you must disclose to the insurer all relevant information which you have acquired
- the level of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
- your practice 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 additional insurance may be mandatory if there is supplemental lending against the security of the property
- your firm are responsible for approving the terms of the absentee landlord policy on behalf of the bank
- your firm must point out to the borrower that the borrower is obliged to 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 respect of the insurance
- the absentee landlord indemnity insurance policy should be placed on risk at no expense to the mortgage company
| Lender | Requirement |
|---|---|
| Aviva Equity Release | Full value of the property. |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| 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 |
| Habito | Higher of purchase price or valuation |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Harpenden Building Society | 110% of mortgage advance |
| JPMorgan | 110% of principal sum. |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Mortgage Express | Amount of loan + 15% |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Paratus | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| 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). |
| Perenna | The higher of the purchase price or valuation. |
| Reliance Bank | \xA31,000,000.00 |
| 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). |
| Scottish Building Society | Amount of mortgage plus 25%. |
| RBS - Direct Line | An amount equal to the value of the property. |
Absentee Landlord Contingency Insurance : Reflections
The full terms, conditions and exclusions for absentee landlord indemnity insurance are explained in the policy paperwork. Property lawyers are obliged to point the borrower to the absentee landlord indemnity insurance policy itself. Absentee Landlord indemnity insurance is designed 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 agreement is in perpetuity unless otherwise stated in the absentee landlord indemnity insurance policy. Adequacy in this regard should be checked.Absentee Landlord indemnity insurance: Important aspects and benefits:
The policy 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 should be checked for the following- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Market value reduction resulting from the successful enforcement of the risks specified in the absentee landlord indemnity 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 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 indemnity insurance, to the extent that such costs are rendered abortive by court decision.
- Cover for compensation incurred in any proceedings in respect of the risks specified in the absentee landlord policy, as well as legal and associated costs.
- Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the absentee landlord insurance.
As with any insurance policy, 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 not be valid.
Absentee Landlord Indemnity Insurance has limitations - Other 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. 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 mortgage company 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.