Indemnity Insurance of Contingent Buildings Mortgage Company conveyancing obligations
Bank of Scotland and Natwest, as with the majority of mortgage companies, set their own requirements when it comes to contingent buildings indemnity insurance. The content herein aims to help conveyancing practitioners on the different lender approved list of panel lawyers where the title for the the property to be mortgaged includes contingent buildings. It is not a substitute for checking the CML handbook requirements for each mortgage company, for example Lloyds TSB, Birmingham Midshires or Virgin Money. The content on this page is not focused on contingent buildings indemnity insurance requirements.
Need help with contingent buildings indemnity insurance from your lender?
Chelsea BS and Yorkshire Bank Home Loans in common with most mortgage companies, instructions are such that where contingent buildings indemnity insurance is effected:
- the contingent buildings indemnity insurance policy should not incorporate conditions that you are aware would void or prejudice the interests of the bank
- the minimum level of cover for the policy must meet the requirements for the bank (See Part II Handbook requirements )
- the contingent buildings indemnity insurance policy must be effected without cost to the bank
- you is obliged to disclose to the insurer all relevant information which you have acquired
- your firm must spell out to the mortgagor that the borrower is obliged to adhere to any conditions of the contingent buildings indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
- your firm are responsible for approving the terms of the contingent buildings policy on behalf of the lender
- the contingent buildings indemnity insurance policy should always be in favor of the bank and, if possible, in favour of the borrower and any future registered proprietor or lender. If the borrower will not be protected by the contingent buildings indemnity insurance policy, the mortgagor needs to be advised accordingly.
- 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 could be required if there is supplemental lending against the mortgaged property
| Lender | Requirement |
|---|---|
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Bradford & Bingley | Amount of loan + 15% |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Godiva Mortgages | Minimum of the value of the property. |
| Intelligent Finance | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| 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. |
| Lloyds | The value of the property. |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Masthaven Bank | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Metro Bank | The open market value of the property according to the valuation report. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Reliance Bank | \xA31,000,000.00 |
| Saffron Building Society | Higher of purchase price or valuation. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). |
| Topaz Finance | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
| Yorkshire Bank | Open market value of property. |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
Contingent Buildings Contingency Insurance : Reflections
The extent of the terms for contingent buildings indemnity insurance are set out in the policy document. Conveyancing Practitioners should point the borrower to the contingent buildings indemnity insurance policy document. Contingent Buildings Contingency insurance is designed to afford indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to ensure it is correct. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the contingent buildings indemnity insurance policy. Adequacy in this regard should be checked.Important aspects and benefits of contingent buildings Contingency insurance :
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the contingent buildings indemnity insurance schedule. Contingent Buildings indemnity insurance Policies should be checked for the following- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the contingent buildings insurance, to the extent that such costs are rendered abortive by court order.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- Cover for compensation incurred in any proceedings in respect of the risks specified in the contingent buildings indemnity insurance, as well as fees of a legal nature.
- Diminution in value due to the successful enforcement of the risks specified in the contingent buildings insurance.
- The out of pocket expenses 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.
- Money paid with the written consent of the insurance company to liberate the land from the risks specified in the contingent buildings policy.
Due diligence should extend to checking that the answers on the application form are accurate. However remote the likelihood of a claim on the mortgage company insurance policy might be you can be sure that the insurer will check the details on any proposal form very carefully prior to any claim being paid out.
Other considerations for contingent buildings indemnity insurance
Contingent Buildings Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that contingent buildings indemnity cover will not necessarily be the answer. Content on this webpage is for general information for conveyancers and solicitors in England and Wales on the the lender 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 contingent buildings Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The above information is in relation to properties in England and Wales.