Mortgage Company conveyancing panel conditions re Deed of Enlargement Indemnity Insurance

Santander and Barnsley BS, like the majority of banks, set their own specific instructions when it comes to deed of enlargement indemnity insurance. The purpose of this page to assist property law practitioners on the different lender approved list of panel lawyers where the title to be charged incorporates deed of enlargement. It is not a alternative for checking the CML handbook requirements for each mortgage company, whether it be Chelsea BS, Halifax or Lloyds TSB. The information on this page is not focused on deed of enlargement indemnity insurance requirements.

Need help with deed of enlargement indemnity insurance from your lender?

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Nationwide and Coventry BS in common with most lenders, obligations require that where deed of enlargement indemnity insurance is effected:

• you must approve the terms of the deed of enlargement policy on behalf of the mortgage company
• the minimum level of cover for the policy must meet the requirements for the bank (See Part II Handbook requirements )
• the deed of enlargement indemnity insurance policy must not incorporate terms which you are aware would invalidate or prejudice the interests of the mortgage company
• your practice is obliged to disclose to the insurer all relevant information which you have acquired
• your firm must supply a duplicate of the deed of enlargement indemnity insurance to the mortgagor and explain to the borrower why the deed of enlargement indemnity insurance policy was effected and that a further policy may be mandatory if there is additional lending against the security of the property
• the deed of enlargement indemnity insurance policy must be placed on risk at no expense to the lender
• the deed of enlargement indemnity insurance policy must be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any future registered proprietor or mortgagee. If the mortgagor will not be covered by the deed of enlargement indemnity insurance policy, you must advise the borrower of this fact.
• your firm is duty bound to explain to the mortgagor that the borrower is obliged to adhere to any conditions of the deed of enlargement indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the insurance

Regarding the extent of cover for the deed of enlargement 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 banks:

Deed of Enlargement Contingency Insurance : Reflections

The full terms, conditions and exclusions for deed of enlargement indemnity insurance are shown in the policy paperwork. Conveyancing solicitors should point your non-lender client to the deed of enlargement indemnity insurance policy document. The intention of deed of enlargement indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check the document to ensure it is as it should be. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the deed of enlargement indemnity insurance policy. It is well worth checking that the time frame is correct.

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Deed of Enlargement Contingency insurance: Significant aspects 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 Cover normally includes

• The cost of works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the deed of enlargement indemnity insurance, to the extent that such costs are rendered abortive by court order.
• The out of pocket expenses 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.
• Money paid with consent in writing from the insurance company to liberate the property from the risks specified in the deed of enlargement indemnity insurance.
• Loss in market value due to the successful enforcement of the risks specified in the deed of enlargement insurance.
• Cover for compensation incurred in any proceedings regarding the risks specified in the deed of enlargement policy, including incurred costs and expenses.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company

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Always consider what is excluded from the deed of enlargement indemnity insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?

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Deed of Enlargement Indemnity Insurance has limitations - Further considerations

Deed of Enlargement insurance may satisfy lenders such as Yorkshire Building Society or Skipton 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.