Lender conveyancing panel requirements re Absentee Landlord Indemnity Insurance
Lloyds TSB and Natwest, like the majority of lenders, set their own requirements when it comes to absentee landlord indemnity insurance. This page is designed to help property law firms on the numerous mortgage company conveyancing panel where the title to be charged incorporates absentee landlord. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Skipton, Virgin Money or Coventry BS. 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?
As a conveyancing practitioner on a mortgage company panel you must report to the bank (see Part 2 of the UK Finance Lenders’ Handbook) if it comes to your attention that the landlord is either absent or insolvent. If the bank are to lend, they may ask you to take out missing landlord indemnity policy. In some conveyancing matters a purchaser or mortgage company might accept a missing landlord indemnity insurance 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 |
|---|---|
| Hinckley and Rugby | Yes. |
| Mortgage Express | Yes |
| Paragon Mortgages Ltd | Generally no, but:- 1. Where the security comprises a house we may be prepared to accept a suitable indemnity policy if the landlord is absent or insolvent where the lease term is a long lease such as 999 years or similar. 2. Where the security comprises a flat please refer the matter to the contact details in 1.11a. |
| RBS (One Account) | Yes. |
| Tipton Coseley Building Society | No, we do not lend in these circumstances. |
| Ulster Bank | Yes. |
About Absentee Landlord Indemnity Insurance
Many solicitor throughout the UK regularly rely on missing landlord policies to help move the conveyancing process when the freeholder or landlord of land or property is insolvent, unresponsive or where the company is no longer in existence. This impacts the ability to pay ground rent and obtain consent to lease assignments and alterations to the residence. The potential loss is that the landlord may request ground rent or attempt forfeiture of the lease claiming breach of covenant should they subsequently surface.
Halifax and Godiva Mortgages as with the majority of lenders, obligations require that where absentee landlord indemnity insurance is to be put on risk:
- your firm must approve the terms of the absentee landlord policy on behalf of the lender
- the absentee landlord indemnity insurance policy should always be in favor of the bank and, wherever possible, in favour of the borrower and any subsequent registered proprietor or mortgage company. If the borrower will not be protected by the absentee landlord indemnity insurance policy, you must advise the mortgagor of this fact.
- the absentee landlord indemnity insurance policy must not incorporate terms that you are aware would void or compromise the interests of the bank
- 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 may be mandatory if there is additional borrowing against the mortgaged property
- the level of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the absentee landlord indemnity insurance policy must be effected at no expense to the mortgage company
- your practice is obliged to disclose to the insurer all relevant information which you have gathered
- your firm is duty bound to spell 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 relation to the insurance
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Godiva Mortgages | Minimum of the value of the property. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| 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. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| 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. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Mortgage Express | Amount of loan + 15% |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Reliance Bank | \xA31,000,000.00 |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| RBS - Direct Line | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Ulster Bank | An amount equal to the value of the property. |
| 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. |
Absentee Landlord Contingency Insurance : Reflections
The extent of the terms for absentee landlord indemnity insurance are explained in the policy document. Conveyancing Practitioners should direct your non-lender client to the absentee landlord indemnity insurance policy itself. Absentee Landlord Contingency insurance is designed to grant indemnity in respect of the risks specified in the policy schedule - so you should check the schedule to ensure it is as it should be. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Absentee Landlord Contingency insurance: Significant features 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- 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 indemnity insurance, to the extent that such costs are rendered abortive by court decision.
- The out of pocket expenses of altering or destroying 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.
- All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the absentee landlord insurance.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Loss in market value due to the successful enforcement of the risks specified in the absentee landlord policy.
- Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the absentee landlord indemnity insurance, including fees of a legal nature.
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 not be valid.
Absentee Landlord Indemnity Insurance has limitations - Additional considerations
Absentee Landlord insurance may satisfy lenders such as Leeds Building Society or Barclays and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.The above information is in relation to properties in England and Wales.