Mortgage Company conveyancing panel conditions re Defective Lease Indemnity Insurance
Barnsley BS and Coventry BS, as with the majority of lenders, set their own requirements when it comes to defective lease indemnity insurance. This page sets out to enlighten conveyancing lawyers on the numerous lender approved list of panel lawyers where the title to be charged incorporates defective lease. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, whether it be Birmingham Midshires, Santander or Halifax. The content on this page is not focused on defective lease indemnity insurance requirements.
Need help with defective lease indemnity insurance from your lender?
Accord and Barclays in common with many lenders, obligations require that where defective lease indemnity insurance is to be put on risk:
- the defective lease indemnity insurance policy needs to be in favor of the mortgage company and, if possible, in favour of the borrower and any subsequent owner or bank. If the borrower will not be covered by the defective lease indemnity insurance policy, the mortgagor needs to be advised accordingly.
- the defective lease indemnity insurance policy must not incorporate conditions that you know would invalidate or compromise the interests of the lender
- your firm must reveal to the insurer all relevant information which you have acquired
- the defective lease indemnity insurance policy should be effected without cost to the bank
- the minimum level of cover for the policy must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your firm must supply a copy of the defective lease indemnity insurance to the borrower and explain to the borrower why the defective lease indemnity insurance policy was effected and that a further policy might be mandatory if there is supplemental lending against the security of the property
- your firm must approve the terms of the defective lease policy on behalf of the bank
- your practice must spell out to the mortgagor that the borrower must comply with any conditions of the defective lease indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the policy
| Lender | Requirement |
|---|---|
| Adam & Company | The open market value of the property according to the valuation report. |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| First Direct | The value of the insurance must be for at least the full value of the property |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Intelligent Finance | 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. |
| 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. |
| Lloyds | The value of the property. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Metro Bank | The open market value of the property according to the valuation report. |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Mortgage Express | Amount of loan + 15% |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| 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. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Reliance Bank | \xA31,000,000.00 |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Topaz Finance | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
Non lender-specific considerations
The full terms, conditions and exclusions for defective lease indemnity insurance are identified in the policy paperwork. Conveyancing Practitioners are obliged to direct your non-lender client to the defective lease indemnity insurance policy itself. The intention of defective lease indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to ensure it is in order. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the defective lease indemnity insurance policy. It is well worth checking that the time frame is correct.Defective Lease indemnity insurance: Significant characteristics and benefits:
The policy 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- 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 defective lease policy, to the extent that such costs are rendered abortive by court decision.
- Money paid with the written consent of the insurance company to liberate the land from the risks specified in the defective lease indemnity insurance.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- 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.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the defective lease indemnity insurance, as well as solicitors charges.
- Diminution in value due to the successful enforcement of the risks specified in the defective lease indemnity insurance.
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the defective lease policy will not be valid.
Further considerations for defective lease indemnity insurance
Defective Lease Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that defective lease indemnity cover will not necessarily be the right solution. Content on this webpage is for general information for Regulated law firms in England and Wales on the the bank solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender 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.