Indemnity Insurance of Contaminated Land Lender conveyancing requirements
Coventry BS and Birmingham Midshires, in common with many mortgage companies, dictate their own specific instructions when it comes to contaminated land indemnity insurance. This page is designed to help residential conveyancing practitioners on the numerous bank conveyancing panel where the title for the the property to be mortgaged includes contaminated land. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Godiva Mortgages, Santander or Yorkshire Building Society. The content on this page is not focused on contaminated land indemnity insurance requirements.
Need help with contaminated land indemnity insurance from your lender?
Virgin Money and Accord in common with the majority of lenders, requirements are that where contaminated land indemnity insurance is to be taken out:
- you are responsible for approving the terms of the contaminated land policy on behalf of the mortgage company
- your practice must send a copy of the contaminated land indemnity insurance to the borrower and explain to the mortgagor why the contaminated land indemnity insurance policy was effected and that a further policy may be mandatory if there is further lending against the security of the property
- the contaminated land indemnity insurance policy should always be for the benefit of the bank and, if possible, for the benefit of the borrower and any future owner or bank. Where the mortgagor will not be protected by the contaminated land indemnity insurance policy, the mortgagor needs to be informed accordingly.
- the contaminated land indemnity insurance policy should be effected without expense to the mortgage company
- your firm is duty bound to explain to the mortgagor that the borrower will need to comply with any conditions of the contaminated land indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the insurance
- the level of indemnity must meet the requirements for the bank (See Part II Handbook requirements )
- the contaminated land indemnity insurance policy should not incorporate conditions that you recognise would void or prejudice the interests of the bank
- you is obliged to disclose to the insurer all relevant information which you have gathered
| Lender | Requirement |
|---|---|
| Accord Mortgages | 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. |
| Adam & Company | The open market value of the property according to the valuation report. |
| Adam & Company International | The open market value of the property according to the valuation report. |
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Birmingham Bank | Please contact Head of Operations to discuss (Gareth Allen) |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Harpenden Building Society | 110% of mortgage advance |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| Landmark | 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. |
| Legal & General Home Finance | The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| RBS - Direct Line | An amount equal to the value of the property. |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
Non lender-specific considerations
The full terms, conditions and exclusions for contaminated land indemnity insurance are shown in the policy paperwork. Property lawyers should point the borrower to the contaminated land indemnity insurance policy document. Contaminated Land indemnity insurance is designed to grant indemnity in respect of the risks specified in the policy schedule - so you should check any draft to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Contaminated Land Contingency insurance: Significant aspects and benefits:
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the contaminated land indemnity insurance schedule. Contaminated Land indemnity insurance Policies are likely to cover the following- Money paid with consent in writing from the insurance company to free the land from the risks specified in the contaminated land policy.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the contaminated land policy, to the extent that such costs are rendered abortive by court order.
- 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.
- Reimbursement for compensation incurred in any action in respect of the risks specified in the contaminated land insurance, as well as fees of a legal nature.
- Market value reduction resulting from the successful enforcement of the risks specified in the contaminated land insurance.
You also need to be sure that the answers on the application form are correct. Regardless of how remote a claim on the mortgage company insurance policy might be you can rest assured that the insurer will check the details on any proposal form thoroughly before any claim is paid out.
Other considerations for contaminated land indemnity insurance
Contaminated Land Indemnity insurance isn’t a solution to all of the relevant problems. Information provided on this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company approved 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 contaminated land 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 is in relation to properties in England and Wales.