Deed of Gift Indemnity Insurance Bank conveyancing requirements

Skipton and Virgin Money, in common with the majority of mortgage companies, set their own specific instructions when it comes to deed of gift indemnity insurance. The content herein aims to help property law firms on the various mortgage company approved list of panel lawyers where the title to be charged includes deed of gift. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Yorkshire Building Society, Halifax or Yorkshire Bank Home Loans. The information on this page Is not to be read as deed of gift indemnity insurance advice.

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In your capacity as a property lawyer on a lender panel, you must notify to the mortgage company where it comes to your attention that the title to the property is subject to a deed of gift or a transaction at an apparent undervalue completed within 5 years of the proposed home loan. You need to be sure that the mortgage company will not be compromised under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. If you are not able to submit an unqualified COT, you must put in place transfer at undervalue or deed of gift indemnity insurance .

You must also obtain clear bankruptcy checks against all parties to any deed of gift or transaction with the potential of being regarded at an undervalue.

About Deed of Gift Indemnity Insurance

Deed of Gift Insurance is typically required owing to an expected or existing transfer at undervalue or deed of gift including gifts of money towards the buying of a residence. The loss arises because if the person who transferred or “gifted” the property (or the money) becomes insolvent their Trustee in Bankruptcy could set aside the transfer and claim an interest in the premises.

Nationwide and RBS like most lenders, instructions are such that where deed of gift indemnity insurance is to be put on risk:

your firm must disclose to the insurer all relevant information which you have gathered
the deed of gift indemnity insurance policy should be placed on risk at no charge to the bank
your practice must supply a copy of the deed of gift indemnity insurance to the borrower and explain to the borrower why the deed of gift indemnity insurance policy was effected and that a further policy might be mandatory if there is supplemental borrowing against the mortgaged property
your firm is duty bound to point out to the borrower that the borrower is obliged to comply with any conditions of the deed of gift indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the insurance
the deed of gift indemnity insurance policy should not incorporate conditions which you recognise would void or prejudice the interests of the lender
your practice must approve the terms of the deed of gift policy on behalf of the lender
the deed of gift indemnity insurance policy must be for the benefit of the bank and, wherever possible, for the benefit of the mortgagor and any future registered proprietor or mortgage company. Where the borrower will not be protected by the deed of gift indemnity insurance policy, the mortgagor should be informed accordingly.
the limit of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )

As to the level of cover for the deed of gift indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for mortgage companies:

Lender	Requirement
Accord Buy to Let	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.
Accord Mortgages	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.
Adam & Company International	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.
Barclays plc	Higher of purchase price or valuation
Britannia	Cover to the full value of the property.
DB UK Bank	An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable
HSBC UK Bank	The value of the insurance must be for at least the full value of the property
Kent Reliance	An amount at least equal to 110% of the mortgage valuation.
Keystone Property Finance	An amount equal to 110% of the valuation or purchase price - whichever is the greater
Manchester Building Society	Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%.
Mortgage Express	Amount of loan + 15%
National Counties Building Society	An amount at least equal to the mortgage advance.
Paratus	An amount equal to 110% of the valuation or purchase price - whichever is the greater.
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.
Rely Mortgages	An amount at least equal to 110% of the mortgage valuation.
Secure Trust Bank	An amount at least equal to the market value. 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).
Tandem Bank	An amount at least equal to 110% of the purchase price or valuation – whichever is the greater.
The Mortgage Business	An amount at least equal to the mortgage advance/credit limit - whichever is the highest.
Royal Bank of Scotland	An amount equal to the value of the property.

Non lender-specific considerations

The extent of the terms for deed of gift indemnity insurance are identified in the policy document. Property lawyers are obliged to direct the borrower to the deed of gift indemnity insurance policy document. The intention of deed of gift indemnity insurance is to afford 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.

Significant features and benefits of deed of gift Contingency insurance :

The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the deed of gift indemnity insurance schedule. Deed of Gift indemnity insurance Policies should be checked for the following

Diminution in value resulting from the successful enforcement of the risks specified in the deed of gift insurance.
The cost 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 property from the risks specified in the deed of gift policy.
All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
Cover for compensation incurred in any proceedings regarding the risks specified in the deed of gift insurance, including incurred costs and expenses.
Expenses for works (including architects’ and surveyors’ 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 gift indemnity insurance, to the extent that such costs are rendered abortive by court decision.

Information contained within this webpage is for general information for Regulated law firms in England and Wales on the the mortgage company solicitor 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 gift 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.