Lender conveyancing panel conditions re Deed of Gift Indemnity Insurance

Barnsley BS and Halifax, as with many lenders, set their own specific instructions when it comes to deed of gift indemnity insurance. This page sets out to enlighten property law solicitors on the different lender conveyancing panel where the title to be charged incorporates deed of gift. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, be it Natwest, Coventry BS or Birmingham Midshires. 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?

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In your capacity as a conveyancing lawyer on a mortgage company panel, you must report to the mortgage company if you are aware that the title to the property was subject to a deed of gift or a transaction at an apparent undervalue completed in the past five years of the proposed charge. You must be satisfied that the bank will acquire their interest in good faith and will be protected under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. If you are not able to issue an unqualified COT, you must put in place transfer at undervalue or deed of gift indemnity insurance .

Please remember to obtain clear bankruptcy searches against all parties to any deed of gift or transaction at an apparent undervalue.

About Deed of Gift Indemnity Insurance

Thousands of lawyers throughout the country regularly recommend Deed of Gift policies owing to a proposed or existing transfer at undervalue or deed of gift including gifts of money towards the purchase of a residence. The loss arises where the person who transferred or “gifted” the premises (or the money) becomes bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.

Lloyds TSB and Virgin Money as with many mortgage companies, obligations require that where deed of gift indemnity insurance is to be taken out:

• the deed of gift indemnity insurance policy must be effected at no cost 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 incorporate conditions which you recognise would void or prejudice the interests of the mortgage company
• you must reveal to the insurer all relevant information which you have gathered
• your firm must provide a duplicate 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 additional insurance may be mandatory if there is additional borrowing against the security of the property
• your practice must point out to the borrower that the borrower must comply with any conditions of the deed of gift indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the insurance
• the deed of gift indemnity insurance policy should always be in favor of the mortgage company and, if possible, for the benefit of the mortgagor and any future registered proprietor or mortgagee. Where the mortgagor will not be covered by the deed of gift indemnity insurance policy, you must advise the borrower of this fact.
• the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )

Regarding the extent of cover for the deed of gift indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the Part 2 requirements for lenders:

Deed of Gift Contingency Insurance : Reflections

The full terms, conditions and exclusions for deed of gift indemnity insurance are shown in the policy paperwork. Conveyancing Practitioners should direct your non-lender client to the deed of gift indemnity insurance policy itself. The intention of deed of gift indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to ensure it is correct. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the deed of gift indemnity insurance policy. Again, please check that this is as you expected.

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Deed of Gift indemnity insurance: Important features and benefits:

The insurance 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 Cover normally includes

• The cost of works (including professional 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 insurance, to the extent that such costs are rendered abortive by court decision.
• Money paid with the written consent of the insurance company to liberate the land from the risks specified in the deed of gift policy.
• Market value reduction due to the successful enforcement of the risks specified in the deed of gift insurance.
• Cover for compensation incurred in any proceedings concerning the risks specified in the deed of gift insurance, as well as legal and associated costs.
• 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.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company

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The content set out above covers to properties in England and Wales.