Forfeiture of Lease Indemnity Insurance Bank conveyancing requirements
RBS and Leeds Building Society, in common with most banks, dictate their own requirements when it comes to forfeiture of lease indemnity insurance. This page sets out to enlighten property law firms on the various bank approved list of panel lawyers where the title to be charged incorporates forfeiture of lease. It is not a alternative for checking the CML handbook requirements for each mortgage company, for example Yorkshire Building Society, Barclays or HSBC. The information on this page Is not to be read as forfeiture of lease indemnity insurance advice.
Need help with forfeiture of lease indemnity insurance from your lender?
Yorkshire Bank Home Loans and Birmingham Midshires like many banks, instructions are such that where forfeiture of lease indemnity insurance is effected:
- the forfeiture of lease indemnity insurance policy should be effected without charge to the lender
- the forfeiture of lease indemnity insurance policy needs to be in favor of the lender and, if possible, in favour of the borrower and any future owner or mortgage company. Where the borrower will not be covered by the forfeiture of lease indemnity insurance policy, you must advise the mortgagor of this fact.
- your firm must provide a copy of the forfeiture of lease indemnity insurance to the borrower and explain to the borrower why the forfeiture of lease indemnity insurance policy was effected and that additional insurance may be mandatory if there is further lending against the security of the property
- you must point out to the borrower that the borrower must adhere to any conditions of the forfeiture of lease indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in relation to the insurance
- your firm must approve the terms of the forfeiture of lease policy on behalf of the lender
- the forfeiture of lease indemnity insurance policy should not incorporate terms that you are aware would void or prejudice the interests of the mortgage company
- your practice is obliged to disclose to the insurer all relevant information which you have obtained
- the minimum level of cover for the policy must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Accord 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 mortgagee. |
| Adam & Company International | The open market value of the property according to the valuation report. |
| 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. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Birmingham Bank | Please contact Head of Operations to discuss (Jackie Burchill) |
| Clydesdale Bank | Open market value of property. |
| Cynergy Bank | The market value of the property. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Harpenden Building Society | 110% of mortgage advance |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| LiveMore | An amount equal to the purchase price or value of the property, 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. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Platform | 110% of principal sum. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
Forfeiture of Lease Contingency Insurance : Reflections
The full terms, conditions and exclusions for forfeiture of lease indemnity insurance are identified in the policy paperwork. Property lawyers should direct your non-lender client to the forfeiture of lease indemnity insurance policy itself. The intention of forfeiture of lease indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to ensure it is as it should be. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.Forfeiture of Lease indemnity insurance: Significant 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- Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, 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.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Reimbursement for compensation incurred in any action concerning the risks specified in the forfeiture of lease indemnity insurance, as well as fees of a legal nature.
- Loss in market value due to the successful enforcement of the risks specified in the forfeiture of lease policy.
- The cost of altering or taking down 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 sums paid with consent in writing from the insurance company to free the property from the risks specified in the forfeiture of lease insurance.
Don't forget to check what is excluded from the forfeiture of lease policy e.g. does the policy cover any property that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?
Additional considerations for forfeiture of lease indemnity insurance
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from forfeiture of lease insurance may be adequate for your client. Information contained within this webpage is for general information for conveyancers and solicitors 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 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 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 content set out above is in relation to properties in England and Wales.