Lender conveyancing panel requirements re Deed of Enlargement Indemnity Insurance
Coventry BS and Lloyds TSB, as with the majority of banks, set their own requirements when it comes to deed of enlargement indemnity insurance. This page is designed to help property law practitioners on the different lender conveyancing panel where the title to be charged incorporates deed of enlargement. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it HSBC, Chelsea BS or Virgin Money. The content on this page is not focused on deed of enlargement indemnity insurance requirements.
Need help with deed of enlargement indemnity insurance from your lender?
Skipton and Barclays in common with many lenders, obligations require that where deed of enlargement indemnity insurance is to be taken out:
- the deed of enlargement indemnity insurance policy must be placed on risk at no cost to the lender
- your practice are responsible for approving the terms of the deed of enlargement policy on behalf of the bank
- your firm is required to disclose to the insurer all relevant information which you have acquired
- your firm is duty bound to point out to the mortgagor that the borrower must adhere to any conditions of the deed of enlargement indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the insurance
- the deed of enlargement indemnity insurance policy should not incorporate conditions that you recognise would void or prejudice the interests of the bank
- the deed of enlargement indemnity insurance policy needs to be for the benefit of the mortgage company and, wherever possible, for the benefit of the borrower and any subsequent owner or lender. If the mortgagor will not be covered by the deed of enlargement indemnity insurance policy, the borrower needs to be advised accordingly.
- your firm must provide a copy of the deed of enlargement indemnity insurance to the mortgagor and explain to the mortgagor why the deed of enlargement indemnity insurance policy was effected and that a further policy may be required if there is additional lending against the security of the property
- the level of indemnity must meet the requirements for the lender (See Part II Handbook requirements )
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Barnsley Building Society | 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. |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Bluestone Mortgages | 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. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Habito | Higher of purchase price or valuation |
| Hodge | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| 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. |
| NRAM Ltd | 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. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Progressive BS | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Whistletree | The value of the property |
| Yorkshire Building Society | 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. |
Non lender-specific considerations
The full terms, conditions and exclusions for deed of enlargement indemnity insurance are shown in the policy paperwork. Conveyancing solicitors are obliged to point the borrower to the deed of enlargement indemnity insurance policy paperwork. The intention of deed of enlargement indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to determine that it is as it should be. 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.Deed of Enlargement indemnity insurance: Important characteristics 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. Deed of Enlargement indemnity insurance Policies are likely to cover the following- The cost of altering or taking down 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 ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Market value reduction resulting from the successful enforcement of the risks specified in the deed of enlargement indemnity insurance.
- Expenses for works (including professional 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 deed of enlargement policy, to the extent that such costs are rendered abortive by court order.
- Reimbursement for compensation incurred in any proceedings in respect of the risks specified in the deed of enlargement indemnity insurance, including solicitors charges.
- All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the deed of enlargement indemnity insurance.
Don't forget to consider what is excluded from the deed of enlargement insurance e.g. does the policy cover any property that has been altered within the year prior to the commencement of the policy? Are legal costs covered?
Additional considerations for deed of enlargement indemnity insurance
Deed of Enlargement 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 deed of enlargement indemnity cover will not necessarily be the answer. Content on this webpage is for general information for Regulated law firms 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 deed of enlargement 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.