Indemnity Insurance of Good Leasehold Title Bank conveyancing requirements

Bank of Scotland and Yorkshire Bank Home Loans, in common with most banks, set their own specific instructions when it comes to good leasehold title indemnity insurance. This page is designed to help domestic conveyancing practitioners on the various bank conveyancing panel where the title for the the property to be mortgaged contains good leasehold title. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Barnsley BS, Coventry BS or Chelsea BS. The content on this page Is not to be read as good leasehold title indemnity insurance advice.

Need help with good leasehold title indemnity insurance from your lender?

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Nationwide and Virgin Money in common with many lenders, instructions are such that where good leasehold title indemnity insurance is effected:

• your firm are responsible for approving the terms of the good leasehold title policy on behalf of the lender
• the good leasehold title indemnity insurance policy must not contain terms that you know would invalidate or compromise the interests of the bank
• the good leasehold title indemnity insurance policy should always be for the benefit of the mortgage company and, wherever possible, for the benefit of the mortgagor and any future owner or mortgagee. Where the borrower will not be covered by the good leasehold title indemnity insurance policy, the mortgagor should be informed accordingly.
• you must point out to the mortgagor that the borrower will need to comply with any conditions of the good leasehold title indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the policy
• the good leasehold title indemnity insurance policy must be effected without cost to the lender
• your firm is required to reveal to the insurer all relevant information which you have acquired
• you must send a copy of the good leasehold title indemnity insurance to the mortgagor and explain to the borrower why the good leasehold title indemnity insurance policy was effected and that a further policy could be required if there is further lending against the security of the property
• the level of indemnity must satisfy the requirements for the mortgage company (See Part II Handbook requirements )

Regarding the extent of cover for the good leasehold title indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for banks:

Good Leasehold Title Contingency Insurance : Reflections

The extent of the terms for good leasehold title indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners should point the borrower to the good leasehold title indemnity insurance policy paperwork. The intention of good leasehold title indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to determine that it is correct. The continuance of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.

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Significant features and benefits of good leasehold title indemnity insurance :

The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the good leasehold title indemnity insurance schedule. Good Leasehold Title indemnity insurance Policies should be checked for the following

• Cover for compensation incurred in any action concerning the risks specified in the good leasehold title insurance, as well as fees of a legal nature.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the good leasehold title policy.
• Diminution in value due to the successful enforcement of the risks specified in the good leasehold title indemnity insurance.
• The cost 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.
• 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 good leasehold title policy, to the extent that such costs are rendered abortive by court decision.

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You also need to be sure that the answers on the application form are correct. Regardless of how remote a claim on the lender insurance policy might be you can certain that the insurer will check the details on any proposal form very carefully before any claim is met.

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Good Leasehold Title Indemnity Insurance has limitations - Other considerations

Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from good leasehold title insurance may be adequate for your client.

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The above information covers to properties in England and Wales.