Forfeiture of Lease Indemnity Insurance Bank conveyancing requirements
Yorkshire Building Society and Bank of Scotland, like the majority of mortgage companies, set their own requirements when it comes to forfeiture of lease indemnity insurance. This page sets out to enlighten domestic conveyancing practitioners on the numerous lender solicitors panel where the title for the the property to be mortgaged includes forfeiture of lease. Solicitors should still check the CML handbook requirements for each mortgage company, be it Yorkshire Bank Home Loans, Nationwide or Barclays. 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?
Accord and Halifax like most lenders, instructions are such that where forfeiture of lease indemnity insurance is to be put on risk:
- your practice is obliged to disclose to the insurer all relevant information which you have gathered
- the forfeiture of lease indemnity insurance policy must not incorporate terms that you are aware would void or compromise the interests of the lender
- your practice must supply a copy of the forfeiture of lease indemnity insurance to the mortgagor and explain to the borrower why the forfeiture of lease indemnity insurance policy was effected and that a further policy could be mandatory if there is further borrowing against the security of the property
- the forfeiture of lease indemnity insurance policy must be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any subsequent registered proprietor or mortgage company. Where 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 should be placed on risk without charge to the mortgage company
- your firm is duty bound to explain to the mortgagor that the borrower will need to comply with any conditions of the forfeiture of lease indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the policy
- the level of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your practice are responsible for approving the terms of the forfeiture of lease policy on behalf of the mortgage company
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Bluestone Mortgages | 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. |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Hodge Equity Release | An amount equal to 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, the borrower(s) and any successor in Title. |
| Holmesdale Building Society | 110% |
| 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. |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Progressive BS | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| Topaz Finance | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
General Forfeiture of Lease indemnity insurance points to consider
The full terms, conditions and exclusions for forfeiture of lease indemnity insurance are shown in the policy paperwork. Property lawyers are obliged to direct your non-lender client to the forfeiture of lease indemnity insurance policy document. Forfeiture of Lease Contingency insurance is designed to grant indemnity in respect of the risks specified in the policy schedule - so you should check any draft to determine that it is correct. The lifetime 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: Significant aspects and benefits:
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the forfeiture of lease indemnity insurance schedule. Forfeiture of Lease indemnity insurance Policies are likely to cover the following- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Liability for damages or compensation incurred in any action regarding the risks specified in the forfeiture of lease indemnity insurance, including incurred costs and expenses.
- 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 liberate the land from the risks specified in the forfeiture of lease indemnity insurance.
- Diminution in value due to the successful enforcement of the risks specified in the forfeiture of lease insurance.
- 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 order.
Always consider what is not included in the forfeiture of lease indemnity insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the commencement of the policy? Does it cover legal costs?
Forfeiture of Lease Indemnity Insurance has limitations - Additional considerations
Forfeiture of Lease insurance may satisfy lenders such as Lloyds TSB or HSBC 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. Content on this webpage is for general information for Regulated law firms in England and Wales on the the bank 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.