Contingent Buildings Indemnity Insurance Lender conveyancing requirements

Barclays and HSBC, in common with many lenders, dictate their own requirements when it comes to contingent buildings indemnity insurance. The purpose of this page to assist property law solicitors on the different lender approved list of panel lawyers where the title to be charged incorporates contingent buildings. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each bank, for example Bank of Scotland, Natwest or Godiva Mortgages. The content on this page Is not to be read as contingent buildings indemnity insurance advice.

Need help with contingent buildings indemnity insurance from your lender?

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Yorkshire Building Society and Santander as with most banks, obligations require that where contingent buildings indemnity insurance is to be put on risk:

• the contingent buildings indemnity insurance policy must not incorporate conditions which you know would invalidate or prejudice the interests of the bank
• the level of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• your firm is duty bound to point out to the borrower that the borrower will need to adhere to any conditions of the contingent buildings indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the policy
• your practice must provide a duplicate of the contingent buildings indemnity insurance to the borrower and explain to the mortgagor why the contingent buildings indemnity insurance policy was effected and that additional insurance might be mandatory if there is supplemental borrowing against the security of the property
• the contingent buildings indemnity insurance policy should always be in favor of the bank and, if possible, for the benefit of the mortgagor and any subsequent owner or mortgagee. If the borrower will not be protected by the contingent buildings indemnity insurance policy, you must advise the borrower of this fact.
• your firm must disclose to the insurer all relevant information which you have gathered
• you must approve the terms of the contingent buildings policy on behalf of the bank
• the contingent buildings indemnity insurance policy must be effected at no cost to the lender

As to the level of cover for the contingent buildings 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:

Non lender-specific considerations

The full terms, conditions and exclusions for contingent buildings indemnity insurance are identified in the policy paperwork. Conveyancing solicitors should direct your non-lender client to the contingent buildings indemnity insurance policy paperwork. Contingent Buildings indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so you should check the schedule to determine that it is in order. 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.

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Significant features and benefits of contingent buildings indemnity insurance :

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. Contingent Buildings indemnity insurance Policies should be checked for the following

• Diminution in value due to the successful enforcement of the risks specified in the contingent buildings insurance.
• Liability for damages or compensation incurred in any action regarding the risks specified in the contingent buildings indemnity insurance, as well as incurred costs and expenses.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Money paid with the written consent of the insurance company to liberate the property from the risks specified in the contingent buildings insurance.
• 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.
• Expenses for 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 contingent buildings indemnity insurance, to the extent that such costs are rendered abortive by court order.

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Don't forget to consider what is excluded from the contingent buildings insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the policy being put on risk? Does it cover legal costs?

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Contingent Buildings Indemnity Insurance has limitations - Other considerations

Contingent Buildings insurance may satisfy lenders such as Coventry BS or Virgin Money 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 covers to properties in England and Wales.