Indemnity Insurance of Contaminated Land Bank conveyancing obligations

HSBC and Santander, in common with many lenders, dictate their own specific instructions when it comes to contaminated land indemnity insurance. The purpose of this page to assist conveyancing practitioners on the numerous mortgage company approved list of panel lawyers where the title for the the property to be mortgaged contains contaminated land. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Bank of Scotland, Godiva Mortgages or Birmingham Midshires. The information on this page Is not to be read as contaminated land indemnity insurance advice.

Need help with contaminated land indemnity insurance from your lender?

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Yorkshire Bank Home Loans and Accord as with the majority of lenders, requirements are that where contaminated land indemnity insurance is effected:

• the contaminated land indemnity insurance policy must be effected without cost to the lender
• you is duty bound to point out to the mortgagor that the borrower is obliged to adhere to any conditions of the contaminated land indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the policy
• the contaminated land indemnity insurance policy should not contain conditions which you know would invalidate or prejudice the interests of the lender
• your firm are responsible for approving the terms of the contaminated land policy on behalf of the mortgage company
• the contaminated land indemnity insurance policy should always be in favor of the lender and, wherever possible, in favour of the mortgagor and any subsequent owner or lender. Where the borrower will not be protected by the contaminated land indemnity insurance policy, the mortgagor should be informed accordingly.
• you must send a copy of the contaminated land indemnity insurance to the mortgagor and explain to the mortgagor why the contaminated land indemnity insurance policy was effected and that a further policy may be necessary if there is supplemental borrowing against the mortgaged property
• your firm must disclose to the insurer all relevant information which you have obtained
• the level of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )

As to the level of cover for the contaminated land indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the CML handbook PII requirements for lenders:

Contaminated Land Contingency Insurance : Reflections

The extent of the terms for contaminated land indemnity insurance are explained in the policy document. Conveyancing solicitors should direct the borrower to the contaminated land indemnity insurance policy itself. Contaminated Land Contingency insurance is devised to afford 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 contract is in perpetuity unless otherwise stated in the contaminated land indemnity insurance policy. Adequacy in this regard should be checked.

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Contaminated Land indemnity insurance: Important characteristics and benefits:

The insurance 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 should be checked for the following

• The cost of works (including professional 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 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.
• Diminution in value due to the successful enforcement of the risks specified in the contaminated land indemnity insurance.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the contaminated land policy.
• Cover for compensation incurred in any proceedings regarding the risks specified in the contaminated land insurance, including incurred costs and expenses.

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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 contaminated land policy will not be valid.

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Contaminated Land Indemnity Insurance has limitations - Further considerations

Contaminated Land insurance may satisfy lenders such as Barclays or Chelsea BS 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.

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The content set out above is in relation to properties in England and Wales.