Forfeiture of Lease Indemnity Insurance Mortgage Company conveyancing requirements

Yorkshire Building Society and Godiva Mortgages, as with the majority of banks, have their own requirements when it comes to forfeiture of lease indemnity insurance. This page sets out to enlighten residential conveyancing firms on the various bank conveyancing panel where the title to be charged incorporates forfeiture of lease. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Natwest, Birmingham Midshires or Lloyds TSB. 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?

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Coventry BS and Virgin Money like most mortgage companies, requirements are that where forfeiture of lease indemnity insurance is to be put on risk:

• 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 next registered proprietor or mortgagee. Where the borrower will not be protected by the forfeiture of lease indemnity insurance policy, you must advise the borrower of this fact.
• you is obliged to reveal to the insurer all relevant information which you have acquired
• the level of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
• the forfeiture of lease indemnity insurance policy should not contain terms which you know would void or prejudice the interests of the bank
• you must point out to the mortgagor that the borrower will need to comply with any conditions of the forfeiture of lease indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in respect of the policy
• you are responsible for approving the terms of the forfeiture of lease policy on behalf of the mortgage company
• you 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 a further policy may be required if there is supplemental lending against the security of the property
• the forfeiture of lease indemnity insurance policy must be placed on risk without expense to the lender

As to the level of cover for the forfeiture of lease indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the CML handbook PII requirements for mortgage companies:

Forfeiture of Lease Contingency Insurance : Reflections

The full terms, conditions and exclusions for forfeiture of lease indemnity insurance are identified in the policy document. Conveyancing solicitors are obliged to point the borrower to the forfeiture of lease indemnity insurance policy itself. Forfeiture of Lease indemnity insurance is designed to afford indemnity in respect of the risks set out in the policy schedule - so it’s important to check any draft to ensure it is correct. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the forfeiture of lease indemnity insurance policy. Adequacy in this regard should be checked.

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Important characteristics and benefits of forfeiture of lease indemnity 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. Forfeiture of Lease indemnity insurance Policies should be checked for the following

• Reimbursement for compensation incurred in any proceedings concerning the risks specified in the forfeiture of lease insurance, including fees of a legal nature.
• 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.
• All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the forfeiture of lease policy.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Expenses for works (including architects’ and surveyors’ 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.
• Market value reduction resulting from the successful enforcement of the risks specified in the forfeiture of lease insurance.

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Due diligence should extend to checking that the answers on the application form are correct. Regardless of how remote a claim on the mortgage company insurance policy might be you can be sure that the insurer will check the details on any proposal form very carefully prior to any claim being met.

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Forfeiture of Lease Indemnity Insurance has limitations - Other considerations

Forfeiture of 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 forfeiture of lease indemnity cover will not necessarily be the answer.

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The above information covers to properties in England and Wales.