Bank conveyancing panel requirements re Forfeiture of Superior lease Indemnity Insurance

HSBC and Birmingham Midshires, as with the majority of mortgage companies, set their own specific instructions when it comes to forfeiture of superior lease indemnity insurance. The content herein aims to help property law lawyers on the numerous lender solicitors panel where the title to be charged contains forfeiture of superior lease. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, for example Chelsea BS, Barclays or Coventry BS. The information on this page is not focused on forfeiture of superior lease indemnity insurance requirements.

Need help with forfeiture of superior lease indemnity insurance from your lender?

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Lloyds TSB and Santander as with the majority of mortgage companies, obligations require that where forfeiture of superior lease indemnity insurance is to be put on risk:

• the level of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• the forfeiture of superior lease indemnity insurance policy should be effected at no cost to the lender
• your practice must supply a copy of the forfeiture of superior lease indemnity insurance to the mortgagor and explain to the mortgagor why the forfeiture of superior lease indemnity insurance policy was effected and that additional insurance could be mandatory if there is supplemental borrowing against the mortgaged property
• your practice must disclose to the insurer all relevant information which you have acquired
• the forfeiture of superior lease indemnity insurance policy must not incorporate terms which you are aware would invalidate or compromise the interests of the lender
• the forfeiture of superior lease indemnity insurance policy must be for the benefit of the mortgage company and, wherever possible, for the benefit of the borrower and any next owner or mortgage company. Where the borrower will not be covered by the forfeiture of superior lease indemnity insurance policy, you must advise the borrower of this fact.
• your practice are responsible for approving the terms of the forfeiture of superior lease policy on behalf of the bank
• your practice is duty bound to point out to the mortgagor that the borrower is obliged to comply with any conditions of the forfeiture of superior lease indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the insurance

Regarding the extent of cover for the forfeiture of superior lease indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the Part 2 requirements for lenders:

Forfeiture of Superior lease Contingency Insurance : Reflections

The full terms, conditions and exclusions for forfeiture of superior lease indemnity insurance are set out in the policy paperwork. Conveyancing Practitioners should direct your non-lender client to the forfeiture of superior lease indemnity insurance policy paperwork. Forfeiture of Superior lease indemnity insurance is devised to afford indemnity in respect of the risks specified in the policy schedule - so it’s important to 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. Again, please check that this is as you expected.

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Forfeiture of Superior lease indemnity insurance: Significant aspects and benefits:

The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the forfeiture of superior lease indemnity insurance schedule. Forfeiture of Superior lease indemnity insurance Policies should be checked for the following

• 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.
• All sums paid with consent in writing from the insurance company to liberate the land from the risks specified in the forfeiture of superior lease policy.
• Loss in market value resulting from the successful enforcement of the risks specified in the forfeiture of superior lease indemnity insurance.
• Expenses for 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 superior lease insurance, 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 insurance company
• Liability for damages or compensation incurred in any action in respect of the risks specified in the forfeiture of superior lease indemnity insurance, including legal and associated costs.

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Due diligence should extend to checking that the answers on the application form are correct. However remote the likelihood of a claim on the lender 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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Further considerations for forfeiture of superior lease indemnity insurance

Forfeiture of Superior lease insurance may satisfy lenders such as Halifax or RBS 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.

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The above information is in relation to properties in England and Wales.