Indemnity Insurance of Deed of Gift Lender conveyancing obligations
Bank of Scotland and Yorkshire Bank Home Loans, as with many lenders, 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 bank solicitors panel where the title to be charged incorporates deed of gift. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Coventry BS, Lloyds TSB or Leeds Building Society. The content 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 lawyer on a mortgage company panel, you must notify to the lender 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 inside five years of the proposed charge. You must be sure that the mortgage company 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. Where you are unable to provide an unqualified certificate of title, you must arrange 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 regularly rely on Deed of Gift insurance owing to an expected or existing transfer at undervalue or deed of gift including gifts of money towards the purchase of a property. The potential loss arises where 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 residence.
Skipton and Barnsley BS like the majority of mortgage companies, obligations require that where deed of gift indemnity insurance is effected:
- the deed of gift indemnity insurance policy needs to be for the benefit of the lender and, wherever possible, for the benefit of the mortgagor and any subsequent owner or bank. If the mortgagor will not be covered by the deed of gift indemnity insurance policy, you must advise the mortgagor of this fact.
- the level of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
- the deed of gift indemnity insurance policy must be effected without expense to the bank
- you must approve the terms of the deed of gift policy on behalf of the bank
- you is obliged to reveal to the insurer all relevant information which you have acquired
- your firm must point out to the borrower that the borrower must adhere to any conditions of the deed of gift indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the insurance
- the deed of gift indemnity insurance policy must not incorporate terms which you know would invalidate or compromise the interests of the lender
- you must send a duplicate 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 might be necessary if there is additional borrowing against the security of the property
| Lender | Requirement |
|---|---|
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Barnsley Building Society | 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. |
| Intelligent Finance | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| JPMorgan | 110% of principal sum. |
| Landmark | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| Leeds Building Society | An amount at least equal to the amount of the mortgage advance plus 10%. Any indemnity insurance policy must protect the borrowers, any successor in title and any Mortgagee. |
| 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. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Mortgage Express | Amount of loan + 15% |
| 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. |
| Platform | 110% of principal sum. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Saffron Building Society | Higher of purchase price or valuation. 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). |
| 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). |
| St James Place | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| Yorkshire Building Society | 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. |
Non lender-specific considerations
The extent of the terms for deed of gift indemnity insurance are shown in the policy paperwork. Conveyancing solicitors are obliged to point your non-lender client to the deed of gift indemnity insurance policy itself. 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 is essential check any draft to determine that it is as it should be. The continuance 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 characteristics and benefits of deed of gift Contingency 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 Gift indemnity insurance Cover normally includes- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the deed of gift indemnity insurance.
- The cost of 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.
- 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.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Cover for compensation incurred in any proceedings in respect of the risks specified in the deed of gift insurance, including incurred costs and expenses.
- Loss in market value 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.