Deed of Gift Indemnity Insurance Bank conveyancing requirements
Chelsea BS and RBS, like many lenders, dictate their own specific instructions when it comes to deed of gift indemnity insurance. This page sets out to enlighten residential conveyancing firms on the numerous mortgage company approved list of panel lawyers where the title to be charged incorporates deed of gift. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be Natwest, Barclays or Accord. 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?
Undertaking property work as a solicitor on a mortgage company panel, you must disclose 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 loan. You must be sure that the lender 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 put in place 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 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 buying of a property. The potential loss arises because if 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 property.
Barnsley BS and Virgin Money as with many banks, requirements are that where deed of gift indemnity insurance is to be taken out:
- your practice 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 must be effected without cost to the bank
- the deed of gift indemnity insurance policy should not incorporate conditions which you are aware would void or compromise the interests of the bank
- you must point out to the borrower that the borrower is obliged to adhere to any conditions of the deed of gift indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the policy
- the deed of gift indemnity insurance policy must be for the benefit of the lender and, if possible, in favour of the mortgagor and any subsequent registered proprietor or bank. If the borrower will not be covered by the deed of gift indemnity insurance policy, the borrower should be informed accordingly.
- your practice must send a copy 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 a further policy may be required if there is supplemental borrowing against the mortgaged property
- your firm is obliged to disclose to the insurer all relevant information which you have acquired
- the level of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| 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. |
| Bradford & Bingley | Amount of loan + 15% |
| Clydesdale Bank | Open market value of property. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Godiva Mortgages | Minimum of the value of the property. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| 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. |
| Legal & General Home Finance | The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Molo Finance 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 mortgages. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage 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. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| TSB | The value of the property |
| Tandem Bank | An amount at least equal to 110% of the purchase price or valuation – whichever is the greater. |
| 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 identified in the policy document. Property lawyers are obliged to point the borrower to the deed of gift indemnity insurance policy paperwork. The intention of deed of gift indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so you should check the document to ensure 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 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 Cover normally includes- 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 insurer
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the deed of gift insurance.
- Expenses for works (including professional fees) for the purpose of the development started, before the commencement of 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.
- Reimbursement for compensation incurred in any action concerning the risks specified in the deed of gift indemnity insurance, including incurred costs and expenses.
- Loss in market value due to the successful enforcement of the risks specified in the deed of gift indemnity insurance.
The content set out above is in relation to properties in England and Wales.