Deed of Gift Indemnity Insurance Lender conveyancing requirements
Chelsea BS and Barclays, in common with the majority of lenders, have their own specific instructions when it comes to deed of gift indemnity insurance. This page sets out to enlighten domestic conveyancing lawyers on the various bank approved list of panel lawyers where the title for the the property to be mortgaged incorporates deed of gift. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each bank, be it Santander, Barnsley BS or Halifax. 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?
Practicing as a conveyancing lawyer on a mortgage company panel, you must disclose to the lender where it comes to your attention that the title to the property is subject to a deed of gift or a transaction at an apparent undervalue completed in the past five years of the proposed loan. You need to be sure that the mortgage company 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 issue an unqualified COT, you must arrange 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 an expected 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 bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the property.
Yorkshire Bank Home Loans and RBS like the majority of lenders, requirements are that where deed of gift indemnity insurance is to be taken out:
- the deed of gift indemnity insurance policy should be placed on risk at no expense to the bank
- your practice is obliged to disclose to the insurer all relevant information which you have obtained
- you are responsible for approving 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 that you recognise would void or prejudice the interests of the lender
- you must spell out to the mortgagor 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 policy
- the deed of gift indemnity insurance policy needs to be for the benefit of the mortgage company and, if possible, for the benefit of the mortgagor and any subsequent registered proprietor or lender. If the borrower 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 satisfy the requirements for the mortgage company (See Part II Handbook requirements )
- your firm must provide a copy of the deed of gift indemnity insurance to the borrower and explain to the mortgagor why the deed of gift indemnity insurance policy was effected and that additional insurance might be required if there is supplemental borrowing against the security of the property
| Lender | Requirement |
|---|---|
| Accord Buy to Let | 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. |
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Aviva Equity Release | Full value of the property. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Godiva Mortgages | Minimum of the value of the property. |
| 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. |
| Lloyds | The value of the property. |
| Lloyds TSB Scotland | The value of the property |
| Magellan Homeloans | At least equal to the value of the property |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| 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). |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| RBS - Direct Line | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Whistletree | The value of the property |
General Deed of Gift indemnity insurance points to consider
The full terms, conditions and exclusions for deed of gift indemnity insurance are identified in the policy document. Conveyancing solicitors are obliged to point the borrower to the deed of gift indemnity insurance policy paperwork. Deed of Gift Contingency insurance is designed to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to determine that it is in order. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Significant characteristics and benefits of deed of gift indemnity insurance :
The policy 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 Policies should be checked for the following- All sums paid with the written consent of the insurance company to free the land from the risks specified in the deed of gift policy.
- The cost 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.
- 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.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Market value reduction due to the successful enforcement of the risks specified in the deed of gift indemnity insurance.
- Cover for compensation incurred in any proceedings in respect of the risks specified in the deed of gift insurance, as well as incurred costs and expenses.
The above information covers to properties in England and Wales.