Indemnity Insurance of Good Leasehold Title Lender conveyancing obligations

Yorkshire Building Society and Birmingham Midshires, in common with most lenders, set their own requirements when it comes to good leasehold title indemnity insurance. The purpose of this page to assist conveyancing practitioners on the different lender approved list of panel lawyers where the title for the the property to be mortgaged incorporates good leasehold title. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Accord, Halifax or Barclays. The content on this page is not focused on good leasehold title indemnity insurance requirements.

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

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Yorkshire Bank Home Loans and RBS as with many banks, instructions are such that where good leasehold title indemnity insurance is to be taken out:

• the good leasehold title indemnity insurance policy must be placed on risk without expense to the bank
• your firm is duty bound to point out to the borrower that the borrower must comply with any conditions of the good leasehold title indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the policy
• you must approve the terms of the good leasehold title policy on behalf of the mortgage company
• the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• your firm must send a copy of the good leasehold title indemnity insurance to the borrower and explain to the borrower why the good leasehold title indemnity insurance policy was effected and that additional insurance could be mandatory if there is supplemental lending against the security of the property
• your firm is required to reveal to the insurer all relevant information which you have obtained
• the good leasehold title indemnity insurance policy should always be in favor of the mortgage company and, wherever possible, in favour of the mortgagor and any subsequent registered proprietor or mortgagee. If the borrower will not be covered by the good leasehold title indemnity insurance policy, the mortgagor must be informed accordingly.
• the good leasehold title indemnity insurance policy must not incorporate conditions which you recognise would invalidate or prejudice the interests of the bank

As to the level of cover for the good leasehold title indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the CML handbook PII requirements for lenders:

Good Leasehold Title Contingency Insurance : Reflections

The extent of the terms for good leasehold title indemnity insurance are set out in the policy document. Property lawyers are obliged to point the borrower to the good leasehold title indemnity insurance policy document. Good Leasehold Title Contingency insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so you should check any draft 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. Again, please check that this is as you expected.

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Important aspects and benefits of good leasehold title indemnity insurance :

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. Good Leasehold Title indemnity insurance Cover normally includes

• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
• The out of pocket expenses 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.
• Liability for damages or compensation incurred in any proceedings concerning the risks specified in the good leasehold title indemnity insurance, including fees of a legal nature.
• Money paid with consent in writing from the insurance company to free the property from the risks specified in the good leasehold title policy.
• Market value reduction resulting from the successful enforcement of the risks specified in the good leasehold title insurance.
• The cost of 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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Always check what is excluded from the good leasehold title policy e.g. does the policy cover any residence that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?

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Good Leasehold Title Indemnity Insurance has limitations - Other considerations

Good Leasehold Title insurance may satisfy lenders such as Coventry BS or Santander 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 covers to properties in England and Wales.