Defective Lease Indemnity Insurance Mortgage Company conveyancing requirements
Virgin Money and RBS, in common with many lenders, have their own specific instructions when it comes to defective lease indemnity insurance. This page is designed to help domestic conveyancing firms on the various lender approved list of panel lawyers where the title to be charged contains defective lease. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, be it Barnsley BS, Bank of Scotland or Lloyds TSB. The information on this page is not focused on defective lease indemnity insurance requirements.
Need help with defective lease indemnity insurance from your lender?
Nationwide and Yorkshire Building Society in common with most lenders, obligations require that where defective lease indemnity insurance is effected:
- your firm must supply a duplicate of the defective lease indemnity insurance to the mortgagor and explain to the mortgagor why the defective lease indemnity insurance policy was effected and that additional insurance may be mandatory if there is additional lending against the mortgaged property
- you are responsible for approving the terms of the defective lease policy on behalf of the lender
- your firm must disclose to the insurer all relevant information which you have gathered
- the defective lease indemnity insurance policy must not incorporate conditions which you are aware would invalidate or compromise the interests of the mortgage company
- the defective lease indemnity insurance policy must be effected at no cost to the bank
- the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )
- your firm is duty bound to explain to the borrower that the borrower will need to adhere to any conditions of the defective lease indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the policy
- the defective lease indemnity insurance policy must be for the benefit of the mortgage company and, if possible, for the benefit of the borrower and any subsequent registered proprietor or bank. Where the mortgagor will not be covered by the defective lease indemnity insurance policy, the borrower must be advised accordingly.
| 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. |
| Adam & Company | The open market value of the property according to the valuation report. |
| 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 | [This lender has not published an answer to this question. Please contact the lender.]
|
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Bluestone Mortgages | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Britannia | Cover to the full value of the property. |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Halifax | An amount at least equal to the mortgage advance. |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Holmesdale Building Society | 110% |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Masthaven Bank | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| National Westminster Bank | An amount equal to the value of the property. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
Defective Lease Contingency Insurance : Reflections
The extent of the terms for defective lease indemnity insurance are set out in the policy document. Conveyancing solicitors should direct your non-lender client to the defective lease indemnity insurance policy paperwork. The intention of defective lease indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to ensure it is correct. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.Defective Lease indemnity insurance: Significant aspects and benefits:
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the defective lease indemnity insurance schedule. Defective Lease indemnity insurance Policies should be checked for the following- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the defective lease insurance, to the extent that such costs are rendered abortive by court order.
- All sums paid with consent in writing from the insurance company to free the land from the risks specified in the defective lease indemnity insurance.
- Liability for damages or compensation incurred in any action concerning the risks specified in the defective lease insurance, as well as solicitors charges.
- Loss in market value due to the successful enforcement of the risks specified in the defective lease indemnity insurance.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- The out of pocket expenses 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.
Due diligence should extend to checking that the answers on the application form are correct. Regardless of how remote a claim on the bank insurance policy might be you can certain that the insurer will check the details on any proposal form very carefully before any claim is paid out.
Defective Lease Indemnity Insurance has limitations - Further considerations
Defective Lease Indemnity insurance isn’t a solution to all of the relevant problems. Information contained within this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the mortgage company indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most defective lease Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The content set out above covers to properties in England and Wales.