Indemnity Insurance of Deed of Gift Bank conveyancing requirements

Barnsley BS and Birmingham Midshires, as with the majority of banks, dictate their own requirements when it comes to deed of gift indemnity insurance. This page sets out to enlighten property law practitioners on the different bank conveyancing panel where the title to be charged contains deed of gift. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be Natwest, Bank of Scotland or Skipton. 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?

---

In your capacity as a conveyancing practitioner on a lender panel, you must disclose to the mortgage company if you are aware that the title to the property is subject to a deed of gift or a transaction at an apparent undervalue completed inside five years of the proposed charge. 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. If you are not able 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 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 purchase of a residence. The loss arises where the person who transferred or “gifted” the property (or the money) becomes bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the premises.

RBS and Virgin Money like most mortgage companies, instructions are such that where deed of gift indemnity insurance is to be put on risk:

• the deed of gift indemnity insurance policy must be for the benefit of the mortgage company and, wherever possible, for the benefit of the mortgagor and any next owner or lender. Where the mortgagor will not be covered by the deed of gift indemnity insurance policy, you must advise the borrower of this fact.
• you must send a copy of the deed of gift indemnity insurance to the mortgagor and explain to the borrower why the deed of gift indemnity insurance policy was effected and that additional insurance may be required if there is additional borrowing against the mortgaged property
• the minimum level of cover for the policy must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
• the deed of gift indemnity insurance policy must not incorporate conditions which you are aware would void or prejudice the interests of the bank
• your practice is duty bound to explain to the mortgagor that the borrower will need to comply with 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 insurance
• the deed of gift indemnity insurance policy should be placed on risk without expense to the mortgage company
• your practice must approve the terms of the deed of gift policy on behalf of the bank
• you is required to reveal to the insurer all relevant information which you have acquired

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 mortgage companies:

Non lender-specific considerations

The full terms, conditions and exclusions for deed of gift indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners should direct your non-lender client to the deed of gift indemnity insurance policy paperwork. The intention of deed of gift indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so you should check any draft to determine that it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the deed of gift indemnity insurance policy. It is well worth checking that the time frame is correct.

---

Deed of Gift Contingency insurance: Important characteristics 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 Gift indemnity insurance Policies are likely to cover the following

• All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Loss in market value resulting from the successful enforcement of the risks specified in the deed of gift policy.
• All sums paid with consent in writing from the insurance company to free the land from the risks specified in the deed of gift insurance.
• 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 insurance, to the extent that such costs are rendered abortive by court decision.
• 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.
• Reimbursement for compensation incurred in any proceedings regarding the risks specified in the deed of gift policy, including fees of a legal nature.

---

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