Indemnity Insurance of Deed of Gift Mortgage Company conveyancing obligations
HSBC and Barnsley BS, in common with the majority of mortgage companies, set their own requirements when it comes to deed of gift indemnity insurance. The content herein aims to help property law firms on the different lender solicitors panel where the title for the the property to be mortgaged includes deed of gift. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, be it Natwest, Birmingham Midshires or Yorkshire Building Society. The content 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 bank panel, you must report to the mortgage company where it comes to your knowledge 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 loan. 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. If you are unable to issue an unqualified certificate of title, 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 with the potential of being regarded at an 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 purchase 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.
Godiva Mortgages and Virgin Money as with many lenders, obligations require that where deed of gift indemnity insurance is effected:
- the deed of gift indemnity insurance policy needs to be in favor of the lender and, wherever possible, for the benefit of the borrower and any subsequent owner or lender. Where the borrower will not be covered by the deed of gift indemnity insurance policy, the mortgagor needs to be informed accordingly.
- 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 might be mandatory if there is supplemental borrowing against the security of the property
- the deed of gift indemnity insurance policy must be effected at no cost to the bank
- your firm must approve the terms of the deed of gift policy on behalf of the mortgage company
- the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )
- your firm must disclose to the insurer all relevant information which you have acquired
- your firm 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 bank of any notice or potential claim in relation to the policy
- the deed of gift indemnity insurance policy must not contain conditions that you recognise would invalidate or prejudice the interests of the mortgage company
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| 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. |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Coventry Building Society | Minimum of the value of the property. |
| Cynergy Bank | The market value of the property. |
| Godiva Mortgages | Minimum of the value of the property. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Mortgage Express | Amount of loan + 15% |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Paratus | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Platform | 110% of principal sum. |
| Precise 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). |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| RBS - Direct Line One | An amount equal to the value of the property. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
Deed of Gift Contingency Insurance : Reflections
The full terms, conditions and exclusions for deed of gift indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners are obliged to point your non-lender client to the deed of gift indemnity insurance policy document. Deed of Gift indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule 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. Adequacy in this regard should be checked.Significant characteristics and benefits of deed of gift Contingency insurance :
The insurance 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 Cover normally includes- 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.
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the deed of gift policy.
- The cost of 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 insurance, to the extent that such costs are rendered abortive by court order.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Reimbursement for compensation incurred in any action in respect of the risks specified in the deed of gift indemnity insurance, including fees of a legal nature.
- Loss in market value due to the successful enforcement of the risks specified in the deed of gift insurance.
The above information is in relation to properties in England and Wales.