Forfeiture of Lease Indemnity Insurance Lender conveyancing requirements
HSBC and Virgin Money, like many mortgage companies, dictate their own requirements when it comes to forfeiture of lease indemnity insurance. This page sets out to enlighten conveyancing lawyers on the various lender conveyancing panel where the title for the the property to be mortgaged incorporates forfeiture of lease. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Bank of Scotland, Natwest or Yorkshire Building Society. The content on this page is not focused on forfeiture of lease indemnity insurance requirements.
Need help with forfeiture of lease indemnity insurance from your lender?
Nationwide and Skipton in common with most banks, requirements are that where forfeiture of lease indemnity insurance is to be taken out:
- your firm must point out to the mortgagor that the borrower is obliged to comply with any conditions of the forfeiture of lease indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the insurance
- the level of indemnity must meet the requirements for the lender (See Part II Handbook requirements )
- the forfeiture of lease indemnity insurance policy should always be in favor of the mortgage company and, if possible, in favour of the mortgagor and any future registered proprietor or mortgage company. If the borrower will not be covered by the forfeiture of lease indemnity insurance policy, you must advise the borrower of this fact.
- the forfeiture of lease indemnity insurance policy must not incorporate terms that you know would void or compromise the interests of the mortgage company
- your practice must approve the terms of the forfeiture of lease policy on behalf of the mortgage company
- the forfeiture of lease indemnity insurance policy should be effected without charge to the mortgage company
- your firm is obliged to reveal to the insurer all relevant information which you have obtained
- your practice must provide a copy of the forfeiture of lease indemnity insurance to the borrower and explain to the mortgagor why the forfeiture of lease indemnity insurance policy was effected and that additional insurance may be mandatory if there is additional borrowing against the mortgaged property
| Lender | Requirement |
|---|---|
| Adam & Company | The open market value of the property according to the valuation report. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Coutts Finance | The open market value of the property according to the valuation report. |
| 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. |
| 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. |
| Mortgage Express | Amount of loan + 15% |
| NRAM Ltd | 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. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| 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. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| RBS- First Active | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
| Yorkshire Bank | Open market value of property. |
Forfeiture of Lease Contingency Insurance : Reflections
The full terms, conditions and exclusions for forfeiture of lease indemnity insurance are explained in the policy document. Conveyancing solicitors should direct your non-lender client to the forfeiture of lease indemnity insurance policy paperwork. The intention of forfeiture of lease indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so it’s important to check any draft to determine that it is in order. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the forfeiture of lease indemnity insurance policy. Adequacy in this regard should be checked.Forfeiture of Lease 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. Forfeiture of Lease indemnity insurance Policies should be checked for the following- Liability for damages or compensation incurred in any action in respect of the risks specified in the forfeiture of lease insurance, as well as fees of a legal nature.
- Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the forfeiture of lease policy.
- 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.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the forfeiture of lease policy, to the extent that such costs are rendered abortive by court decision.
- Market value reduction due to the successful enforcement of the risks specified in the forfeiture of lease indemnity insurance.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
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 forfeiture of lease policy will not be valid.
Additional considerations for forfeiture of lease indemnity insurance
There may be consequences arising from the enforcement of the risks identified in the forfeiture of lease indemnity insurance which are not adequately covered by financial compensation. Information contained within this webpage is for general information for Regulated law firms in England and Wales on the the lender approved 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 forfeiture of 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 above information is in relation to properties in England and Wales.