Mortgage Company conveyancing panel requirements re Defective Title Indemnity Insurance
Skipton and Yorkshire Bank Home Loans, as with most mortgage companies, set their own requirements when it comes to defective title indemnity insurance. The content herein aims to help property law lawyers on the various mortgage company approved list of panel lawyers where the title for the the property to be mortgaged includes defective title. It is not a substitute for checking the CML handbook requirements for each mortgage company, whether it be Birmingham Midshires, Lloyds TSB or Godiva Mortgages. The content on this page is not focused on defective title indemnity insurance requirements.
Need help with defective title indemnity insurance from your lender?
As a conveyancing lawyer on a lender panel, you must notify to the bank where it comes to your knowledge that the title to the property was based on adverse possession or possessory title. This may be acceptable if the seller is or on completion the borrower will be registered at the Land Registry as registered proprietor of a possessory title. In the case of lost title deeds, the statutory declaration must explain the loss satisfactorily.
A bank will need defective title indemnity insurance where there are buildings on the part in question or where the land is essential for access or services;
A lender may not need defective title indemnity insurance in transactions where such title affects land on which no buildings are erected or which is not essential for access or services. In such cases, you must send a plan of the whole of the land to be mortgaged to the mortgage company identifying the area of land having possessory or defective title. The bank will refer the disclosure to their valuer so that an assessment can be made of the proposed security. The bank will then notify you of any additional requirements or if a revised mortgage offer is to be resent.
About Defective Title Indemnity Insurance
Thousands of solicitor accross the country regularly recommend defective title insurance owing to because a property or land has only been registered with a less that perfect title at the Land Registry, usually arising from lost deeds or adverse possession. Defective title insurance tends to indemnify the insured upon challenge to the title resulting in damages or compensation awarded by a court or the Lands Tribunal, the cost of altering or demolishing all or any part of the property to comply with a court order or injunction and reduction in market value of the property prior to and after any estate right title restrictive covenant or interest being established adverse to or in derogation of the Insured’s title to the property.
Barnsley BS and Coventry BS like the majority of mortgage companies, requirements are that where defective title indemnity insurance is to be taken out:
- the defective title indemnity insurance policy should not incorporate conditions that you know would void or prejudice the interests of the mortgage company
- your firm is obliged to disclose to the insurer all relevant information which you have acquired
- your firm must supply a copy of the defective title indemnity insurance to the borrower and explain to the mortgagor why the defective title indemnity insurance policy was effected and that a further policy may be required if there is additional borrowing against the security of the property
- you must explain to the borrower that the borrower is obliged to comply with any conditions of the defective title indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the insurance
- the minimum level of cover for the policy must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your firm are responsible for approving the terms of the defective title policy on behalf of the mortgage company
- the defective title indemnity insurance policy needs to be for the benefit of the mortgage company and, if possible, in favour of the mortgagor and any future owner or bank. Where the mortgagor will not be covered by the defective title indemnity insurance policy, you must advise the mortgagor of this fact.
- the defective title indemnity insurance policy should be placed on risk without expense to the lender
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| 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. |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Britannia | Cover to the full value of the property. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| 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. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| Leeds Building Society | An amount at least equal to the amount of the mortgage advance plus 10%. Any indemnity insurance policy must protect the borrowers, any successor in title and any Mortgagee. |
| Pepper Money | An amount equal to at least 110% of the purchase price or value, whichever is higher. 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). |
| Progressive BS | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher. |
| TSB | The value of the property |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| RBS - Virgin One | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
Defective Title Contingency Insurance : Reflections
The full terms, conditions and exclusions for defective title indemnity insurance are explained in the policy paperwork. Property lawyers should direct your non-lender client to the defective title indemnity insurance policy itself. Defective Title indemnity insurance is devised to afford indemnity in respect of the risks specified in the policy schedule - so you should check the schedule to ensure it is in order. 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.Important characteristics and benefits of defective title Contingency insurance :
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. Defective Title indemnity insurance Cover normally includes- 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.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- 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 title insurance, to the extent that such costs are rendered abortive by court order.
- Cover for compensation incurred in any proceedings regarding the risks specified in the defective title indemnity insurance, including incurred costs and expenses.
- All sums paid with the written consent of the insurance company to free the land from the risks specified in the defective title indemnity insurance.
- Market value reduction due to the successful enforcement of the risks specified in the defective title policy.
You also need to be sure that the answers on the application form are correct. However remote the likelihood of a claim on the lender insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being met.
Defective Title Indemnity Insurance has limitations - Further considerations
Defective Title insurance may satisfy lenders such as Leeds Building Society or Virgin Money and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.The content set out above is in relation to properties in England and Wales.