Lender conveyancing panel requirements re Deed of Gift Indemnity Insurance
Chelsea BS and Bank of Scotland, like the majority of banks, have their own specific instructions when it comes to deed of gift indemnity insurance. The content herein aims to help domestic conveyancing lawyers on the different mortgage company 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 CML handbook requirements for each mortgage company, be it Virgin Money, Yorkshire Building Society or HSBC. 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?
As a conveyancing practitioner on a mortgage company panel, you must disclose to the lender 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 within five years of the proposed home loan. You need to 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. Where you are not able to submit an unqualified certificate of title, 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 with the potential of being regarded at an undervalue.
About Deed of Gift Indemnity Insurance
Thousands of conveyancers throughout the UK regularly recommend Deed of Gift policies owing to an expected or existing transfer at undervalue or deed of gift including gifts of money towards the buying of a property. The loss arises because if the person who transferred or “gifted” the premises (or the money) becomes insolvent their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.
Godiva Mortgages and Birmingham Midshires in common with many banks, instructions are such that where deed of gift indemnity insurance is to be put on risk:
- the level of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the deed of gift indemnity insurance policy should not incorporate conditions that you recognise would void or prejudice the interests of the bank
- your practice are responsible for approving the terms of the deed of gift policy on behalf of the lender
- the deed of gift indemnity insurance policy needs to be for the benefit of the mortgage company and, wherever possible, for the benefit of the mortgagor and any future registered proprietor or bank. Where the mortgagor will not be covered by the deed of gift indemnity insurance policy, the mortgagor needs to be informed accordingly.
- your practice is obliged to disclose to the insurer all relevant information which you have obtained
- your practice must spell out to the mortgagor that the borrower will need to 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 respect of the policy
- the deed of gift indemnity insurance policy must be placed on risk without charge to the lender
- your firm must supply 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 a further policy could be mandatory if there is additional lending against the security of the property
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland Private | Not less than the Facility plus 10%. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Habito | Higher of purchase price or valuation |
| Harpenden Building Society | 110% of mortgage advance |
| ITL Mortgages | Minimum of the value of the property. |
| Investec | The open market value of the property according to the valuation report. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Lloyds Bank Private Banking | Not less than the Facility plus 10%. |
| Metro Bank | The open market value of the property according to the valuation report. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Paratus | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| 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. |
General Deed of Gift indemnity insurance points to consider
The extent of the terms for deed of gift indemnity insurance are set out in the policy document. Conveyancing solicitors should direct your non-lender client to the deed of gift indemnity insurance policy document. The intention of deed of gift indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so you should check any draft to ensure it is correct. 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 indemnity 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 should be checked for the following- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the deed of gift policy, to the extent that such costs are rendered abortive by court order.
- All sums paid with the written consent of the insurance company to free the land from the risks specified in the deed of gift indemnity insurance.
- Loss in market value resulting from the successful enforcement of 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
- Cover for compensation incurred in any proceedings regarding the risks specified in the deed of gift policy, as well as legal and associated costs.
- 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 above information is in relation to properties in England and Wales.