Mortgage Company conveyancing panel requirements re Forfeiture of Lease Indemnity Insurance
Barclays and RBS, in common with many mortgage companies, set their own specific instructions when it comes to forfeiture of lease indemnity insurance. This page sets out to enlighten domestic conveyancing firms on the various lender solicitors panel where the title to be charged incorporates forfeiture of lease. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, be it Birmingham Midshires, Nationwide or Halifax. 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?
Yorkshire Building Society and Accord as with many banks, obligations require that where forfeiture of lease indemnity insurance is to be put on risk:
- the forfeiture of lease indemnity insurance policy must be for the benefit of the bank and, wherever possible, in favour of the mortgagor and any next owner or lender. Where the borrower will not be protected by the forfeiture of lease indemnity insurance policy, you must advise the borrower of this fact.
- you must provide a copy of the forfeiture of lease indemnity insurance to the mortgagor and explain to the mortgagor why the forfeiture of lease indemnity insurance policy was effected and that additional insurance could be required if there is further borrowing against the security of the property
- your practice is required to reveal to the insurer all relevant information which you have acquired
- the forfeiture of lease indemnity insurance policy should not incorporate terms that you are aware would void or prejudice the interests of the lender
- the limit of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
- you are responsible for approving the terms of the forfeiture of lease policy on behalf of the bank
- the forfeiture of lease indemnity insurance policy must be effected at no cost to the bank
- your practice is duty bound to point out to the borrower that the borrower is obliged to comply with 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 policy
| Lender | Requirement |
|---|---|
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Britannia | Cover to the full value of the property. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Coventry Building Society | Minimum of the value of the property. |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Holmesdale Building Society | 110% |
| JPMorgan | 110% of principal sum. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| 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. |
| Lloyds | The value of the property. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Pepper Money (UK) | 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). |
| Scottish Building Society | Amount of mortgage plus 25%. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| St James Place | 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. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
General Forfeiture of Lease indemnity insurance points to consider
The full terms, conditions and exclusions for forfeiture of lease indemnity insurance are explained in the policy paperwork. Property lawyers are obliged to point the borrower to the forfeiture of lease indemnity insurance policy itself. The intention of forfeiture of lease indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so you should check the schedule to ensure it is correct. 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.Forfeiture of Lease indemnity insurance: Important characteristics and benefits:
Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Forfeiture of Lease indemnity insurance Policies should be checked for the following- Market value reduction resulting from the successful enforcement of the risks specified in the forfeiture of lease insurance.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- Expenses for works (including professional fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the forfeiture of lease indemnity insurance, to the extent that such costs are rendered abortive by court order.
- 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.
- Cover for compensation incurred in any action in respect of the risks specified in the forfeiture of lease policy, as well as incurred costs and expenses.
- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the forfeiture of lease insurance.
You also need to be sure that the answers on the application form are accurate. 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 thoroughly before any claim is met.
Forfeiture of Lease Indemnity Insurance has limitations - Supplemental considerations
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. Content on this webpage is for general information for Regulated law firms in England and Wales on the the mortgage company solicitor 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 content set out above covers to properties in England and Wales.