Indemnity Insurance of Contaminated Land Bank conveyancing instructions

Nationwide and Coventry BS, in common with most banks, dictate their own specific instructions when it comes to contaminated land indemnity insurance. This page sets out to enlighten domestic conveyancing lawyers on the different bank solicitors panel where the title to be charged contains contaminated land. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Yorkshire Building Society, HSBC or Birmingham Midshires. The content 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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Halifax and Lloyds TSB like most lenders, obligations require that where contaminated land indemnity insurance is to be put on risk:

• the limit of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
• the contaminated land indemnity insurance policy must be for the benefit of the bank and, if possible, for the benefit of the borrower and any future registered proprietor or lender. If the borrower will not be protected by the contaminated land indemnity insurance policy, the mortgagor should be informed accordingly.
• your practice is duty bound to point out to the mortgagor that the borrower is obliged 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 contaminated land indemnity insurance policy must be placed on risk at no expense to the bank
• you is required to disclose to the insurer all relevant information which you have acquired
• your practice must approve the terms of the contaminated land policy on behalf of the bank
• your firm must supply a duplicate 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 additional insurance might be mandatory if there is supplemental borrowing against the mortgaged property
• the contaminated land indemnity insurance policy should not contain terms which you recognise would void or prejudice the interests of the lender

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 Part 2 requirements for lenders:

Non lender-specific considerations

The full terms, conditions and exclusions for contaminated land indemnity insurance are identified in the policy document. Property lawyers should point your non-lender client to the contaminated land indemnity insurance policy document. The intention of contaminated land indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so it is essential check the schedule to determine that it is correct. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the contaminated land indemnity insurance policy. It is well worth checking that the time frame is correct.

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Contaminated Land indemnity insurance: Important 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. Contaminated Land indemnity insurance Policies should be checked for the following

• 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 other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Market value reduction due to the successful enforcement of the risks specified in the contaminated land policy.
• Money paid with the written consent of the insurance company to free the property from the risks specified in the contaminated land indemnity insurance.
• Cover for compensation incurred in any proceedings concerning the risks specified in the contaminated land policy, including legal and associated costs.
• 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 contaminated land policy, to the extent that such costs are rendered abortive by court decision.

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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 contaminated land policy will be invalidated.

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Supplemental considerations for contaminated land indemnity insurance

Contaminated Land insurance may satisfy lenders such as Chelsea BS or Bank of Scotland 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 above information is in relation to properties in England and Wales.