Indemnity Insurance of Deed of Enlargement Bank conveyancing requirements
Halifax and Natwest, like many 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 various mortgage company solicitors panel where the title to be charged incorporates deed of enlargement. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, for example Accord, Coventry BS or Godiva Mortgages. The content on this page Is not to be read as deed of enlargement indemnity insurance advice.
Need help with deed of enlargement indemnity insurance from your lender?
Leeds Building Society and Nationwide in common with many mortgage companies, obligations require that where deed of enlargement indemnity insurance is to be put on risk:
- your firm are responsible for approving the terms of the deed of enlargement policy on behalf of the mortgage company
- your practice must disclose to the insurer all relevant information which you have obtained
- 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 could be necessary if there is additional borrowing against the security of the property
- the minimum level of cover for the policy must satisfy the requirements for the lender (See Part II Handbook requirements )
- the deed of enlargement indemnity insurance policy should not incorporate conditions that you are aware would invalidate or prejudice the interests of the bank
- the deed of enlargement indemnity insurance policy should be placed on risk without expense to the bank
- the deed of enlargement indemnity insurance policy must be in favor of the lender and, wherever possible, for the benefit of the mortgagor and any future registered proprietor or bank. Where the mortgagor will not be covered by the deed of enlargement indemnity insurance policy, the borrower should be informed accordingly.
- your firm is duty bound to point out to the borrower that the borrower will need to comply with 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 relation to the policy
| Lender | Requirement |
|---|---|
| Adam & Company | The open market value of the property according to the valuation report. |
| 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Birmingham Bank | Please contact Head of Operations to discuss (Jackie Burchill) |
| 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. |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Halifax | An amount at least equal to the mortgage advance. |
| Hodge Equity Release | 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. |
| Holmesdale Building Society | 110% |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Lloyds | The value of the property. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Mortgage Express | Amount of loan + 15% |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| RBS - Direct Line | An amount equal to the value of the property. |
| Yorkshire Bank | Open market value of property. |
Deed of Enlargement Contingency Insurance : Reflections
The full terms, conditions and exclusions for deed of enlargement indemnity insurance are shown in the policy paperwork. Property lawyers should point your non-lender client to the deed of enlargement indemnity insurance policy document. Deed of Enlargement indemnity insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to ensure it is correct. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Important features and benefits of deed of enlargement indemnity insurance :
Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Deed of Enlargement indemnity insurance Cover normally includes- Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the deed of enlargement insurance, as well as legal and associated costs.
- The cost of works (including professional fees) for the purpose of the development started, 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 decision.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Diminution in value resulting from the successful enforcement of the risks specified in the deed of enlargement policy.
- All sums paid with consent in writing from the insurance company to free the property from the risks specified in the deed of enlargement indemnity insurance.
- The cost 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.
Always check what is not included in the deed of enlargement policy 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?
Additional considerations for deed of enlargement indemnity insurance
There may be consequences arising from the enforcement of the risks identified in the deed of enlargement insurance which are not adequately covered by financial compensation. Content on this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company approved panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender 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 above information is in relation to properties in England and Wales.