Bank conveyancing panel requirements re Deed of Gift Indemnity Insurance
Coventry BS and Barclays, as with the majority of mortgage companies, set their own specific instructions when it comes to deed of gift indemnity insurance. This page is designed to help residential conveyancing solicitors on the different mortgage company conveyancing panel where the title for the the property to be mortgaged includes deed of gift. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, be it Leeds Building Society, HSBC or Lloyds TSB. The information on this page is not focused on deed of gift indemnity insurance requirements.
Need help with deed of gift indemnity insurance from your lender?
Being a conveyancing practitioner on a mortgage company panel, you must disclose to the bank where it comes to your attention that the title to the property was subject to a deed of gift or a transaction at an apparent undervalue completed within five years of the proposed loan. You must be satisfied that the bank will not be compromised under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. Where you are unable to provide an unqualified COT, you must put in place transfer at undervalue or deed of gift indemnity insurance .
Please remember to obtain clear bankruptcy checks against all parties to any deed of gift or transaction at an apparent undervalue.
About Deed of Gift Indemnity Insurance
Many lawyers across the country often rely on Deed of Gift insurance owing to a proposed or existing transfer at undervalue or deed of gift including gifts of money towards the buying of a residence. The potential loss arises where the person who transferred or “gifted” the premises (or the money) becomes insolvent their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.
Nationwide and Birmingham Midshires in common with most mortgage companies, instructions are such that where deed of gift indemnity insurance is effected:
- the deed of gift indemnity insurance policy must be in favor of the bank and, wherever possible, for the benefit of the borrower and any next registered proprietor or mortgagee. If the mortgagor will not be covered by the deed of gift indemnity insurance policy, you must advise the mortgagor of this fact.
- your practice must send 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 may be required if there is supplemental borrowing against the security of the property
- your firm is required to reveal to the insurer all relevant information which you have obtained
- the minimum level of cover for the policy must satisfy the requirements for the lender (See Part II Handbook requirements )
- your practice is duty bound to point out to the mortgagor that the borrower will need to adhere to any conditions of the deed of gift indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
- the deed of gift indemnity insurance policy should be placed on risk without expense to the mortgage company
- your firm must approve the terms of the deed of gift policy on behalf of the mortgage company
- the deed of gift indemnity insurance policy should not contain terms which you are aware would invalidate or prejudice the interests of the mortgage company
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| First Direct | The value of the insurance must be for at least the full value of the property |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Habito | Higher of purchase price or valuation |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| 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. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| Lloyds | The value of the property. |
| 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. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Paratus | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Perenna | The higher of the purchase price or valuation. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
| 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. |
General Deed of Gift indemnity insurance points to consider
The full terms, conditions and exclusions for deed of gift indemnity insurance are explained in the policy document. Conveyancing solicitors should direct the borrower to the deed of gift indemnity insurance policy document. The intention of deed of gift indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to ensure it is in order. The continuance of this non-investment insurance contract is in perpetuity unless otherwise stated in the deed of gift indemnity insurance policy. Again, please check that this is as you expected.Important aspects and benefits of deed of gift Contingency insurance :
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 Gift indemnity insurance Cover normally includes- Reimbursement for compensation incurred in any action in respect of the risks specified in the deed of gift insurance, including legal and associated costs.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to 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.
- 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 property from the risks specified in the deed of gift policy.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Market value reduction resulting from the successful enforcement of the risks specified in the deed of gift policy.
The content set out above covers to properties in England and Wales.