Mortgage Company conveyancing panel requirements re Good Leasehold Title Indemnity Insurance

Halifax and Virgin Money, in common with many banks, have their own requirements when it comes to good leasehold title indemnity insurance. This page is designed to help property law solicitors on the numerous lender solicitors panel where the title to be charged includes good leasehold title. Lawyers are advised to familiarise themselves with the CML handbook requirements for each bank, whether it be Natwest, Leeds Building Society or Yorkshire Building Society. The information 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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HSBC and Santander like most lenders, obligations require that where good leasehold title indemnity insurance is effected:

• 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 lender. If the mortgagor will not be covered by the good leasehold title indemnity insurance policy, you must advise the borrower of this fact.
• your firm is duty bound to point out to the mortgagor that the borrower must adhere to any conditions of the good leasehold title indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in relation to the insurance
• your firm must approve the terms of the good leasehold title policy on behalf of the bank
• the good leasehold title indemnity insurance policy must be placed on risk without cost to the lender
• you must reveal to the insurer all relevant information which you have obtained
• you 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 a further policy might be necessary if there is further borrowing against the mortgaged property
• the good leasehold title indemnity insurance policy should not contain terms that you are aware would void or prejudice the interests of the mortgage company
• the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )

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 Part 2 requirements for banks:

General Good Leasehold Title indemnity insurance points to consider

The extent of the terms for good leasehold title indemnity insurance are set out in the policy document. Conveyancing Practitioners are obliged to direct your non-lender client to the good leasehold title indemnity insurance policy itself. The intention of good leasehold title indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so you should check the document to determine that it is correct. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the good leasehold title indemnity insurance policy. Again, please check that this is as you expected.

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Significant characteristics and benefits of good leasehold title indemnity insurance :

This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Good Leasehold Title indemnity insurance Policies should be checked for the following

• Cover for compensation incurred in any proceedings concerning the risks specified in the good leasehold title insurance, as well as incurred costs and expenses.
• Money paid with consent in writing from the insurance company to free the property from the risks specified in the good leasehold title insurance.
• The cost of works (including architects’ and surveyors’ fees) for the purpose of the development commenced, before the commencement of 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.
• The out of pocket expenses of altering or demolishing 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.
• Loss in market value due to the successful enforcement of the risks specified in the good leasehold title insurance.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer

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Due diligence should extend to checking that the answers on the application form are accurate. Regardless of how remote a claim on the bank 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 admitted.

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Other considerations for good leasehold title indemnity insurance

There may be consequences arising from the enforcement of the risks identified in the good leasehold title policy which are not adequately covered by financial compensation.

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The content set out above is in relation to properties in England and Wales.