Indemnity Insurance of Deed of Gift Bank conveyancing instructions
Coventry BS and Leeds Building Society, like many banks, dictate their own requirements when it comes to deed of gift indemnity insurance. The purpose of this page to assist residential conveyancing practitioners on the numerous bank conveyancing panel where the title for the the property to be mortgaged includes deed of gift. Solicitors should still check the CML handbook requirements for each bank, be it Lloyds TSB, Virgin Money or Chelsea BS. The information on this page Is not to be read as deed of gift indemnity insurance advice.
Need help with deed of gift indemnity insurance from your lender?
Undertaking property work as a property lawyer on a lender panel, you must notify 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 inside 5 years of the proposed mortgage. You need to 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. If you are not able to issue an unconditional certificate of title, 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 at an apparent undervalue.
About Deed of Gift Indemnity Insurance
Deed of Gift Insurance is normally needed owing to a proposed 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 bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.
RBS and Accord in common with many mortgage companies, obligations require that where deed of gift indemnity insurance is to be taken out:
- your firm is obliged to disclose to the insurer all relevant information which you have obtained
- the deed of gift indemnity insurance policy should not incorporate conditions which you are aware would void or compromise the interests of the bank
- your firm is duty bound to spell out to the borrower 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 lender of any notice or potential claim in respect of the insurance
- your firm must approve the terms of the deed of gift policy on behalf of the lender
- your firm must supply 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 necessary if there is further borrowing against the mortgaged property
- the limit of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- the deed of gift indemnity insurance policy should be placed on risk at no charge to the bank
- the deed of gift indemnity insurance policy must be in favor of the lender and, wherever possible, in favour of the borrower and any next owner or mortgagee. If the borrower will not be covered by the deed of gift indemnity insurance policy, you must advise the mortgagor of this fact.
| Lender | Requirement |
|---|---|
| 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. |
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Birmingham Bank | Please contact Head of Operations to discuss (Jackie Burchill) |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Bradford & Bingley | Amount of loan + 15% |
| Godiva Mortgages | Minimum of the value of the property. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Harpenden Building Society | 110% of mortgage advance |
| JPMorgan | 110% of principal sum. |
| 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. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| Metro Bank | The open market value of the property according to the valuation report. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Perenna | The higher of the purchase price or valuation. |
| 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. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
Deed of Gift Contingency Insurance : Reflections
The extent of the terms for deed of gift indemnity insurance are set out in the policy document. Conveyancing solicitors are obliged to point your non-lender client to the deed of gift indemnity insurance policy paperwork. The intention of deed of gift indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it’s important to check the document to determine that 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. Adequacy in this regard should be checked.Deed of Gift Contingency insurance: Important characteristics and benefits:
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 Policies should be checked for the following- Cover for compensation incurred in any action concerning the risks specified in the deed of gift indemnity insurance, as well as legal and associated costs.
- The out of pocket expenses of altering or taking down 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 sums paid with consent in writing from the insurance company to liberate the land from the risks specified in the deed of gift indemnity insurance.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Diminution in value resulting from the successful enforcement of the risks specified in the deed of gift policy.
- Expenses for works (including professional fees) for the purpose of the development commenced, 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 order.
The above information covers to properties in England and Wales.