Lender conveyancing panel requirements re Improvement Grant Liability Indemnity Insurance

Lloyds TSB and Yorkshire Building Society, like many mortgage companies, set their own specific instructions when it comes to improvement grant liability indemnity insurance. This page sets out to enlighten conveyancing firms on the different mortgage company solicitors panel where the title to be charged incorporates improvement grant liability. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, for example HSBC, Yorkshire Bank Home Loans or Chelsea BS. The information on this page Is not to be read as improvement grant liability indemnity insurance advice.

Need help with improvement grant liability indemnity insurance from your lender?

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Santander and Birmingham Midshires like many lenders, requirements are that where improvement grant liability indemnity insurance is effected:

• your practice must approve the terms of the improvement grant liability policy on behalf of the mortgage company
• you must provide a duplicate of the improvement grant liability indemnity insurance to the mortgagor and explain to the borrower why the improvement grant liability indemnity insurance policy was effected and that additional insurance might be necessary if there is additional borrowing against the security of the property
• your firm is duty bound to explain to the mortgagor that the borrower must comply with any conditions of the improvement grant liability indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
• the improvement grant liability indemnity insurance policy should be placed on risk at no charge to the bank
• the improvement grant liability indemnity insurance policy should not incorporate terms which you are aware would void or prejudice the interests of the lender
• the level of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• the improvement grant liability indemnity insurance policy should always be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any future registered proprietor or lender. If the borrower will not be covered by the improvement grant liability indemnity insurance policy, you must advise the mortgagor of this fact.
• you must reveal to the insurer all relevant information which you have obtained

As to the level of cover for the improvement grant liability indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for lenders:

Improvement Grant Liability Contingency Insurance : Reflections

The full terms, conditions and exclusions for improvement grant liability indemnity insurance are shown in the policy document. Conveyancing Practitioners are obliged to direct the borrower to the improvement grant liability indemnity insurance policy paperwork. The intention of improvement grant liability indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so you should check the schedule to determine that it is as it should be. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.

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Important features and benefits of improvement grant liability 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. Improvement Grant Liability indemnity insurance Policies are likely to cover the following

• Money paid with the written consent of the insurance company to free the land from the risks specified in the improvement grant liability indemnity insurance.
• Cover for compensation incurred in any action regarding the risks specified in the improvement grant liability insurance, as well as solicitors charges.
• 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.
• 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 improvement grant liability insurance, to the extent that such costs are rendered abortive by court order.
• All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
• Diminution in value resulting from the successful enforcement of the risks specified in the improvement grant liability insurance.

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Due diligence should extend to checking that the answers on the application form are accurate. However remote the likelihood of a claim on the lender insurance policy might be you can rest assured that the insurer will check the details on any proposal form very carefully before any claim is paid out.

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Additional considerations for improvement grant liability indemnity insurance

Improvement Grant Liability insurance may satisfy lenders such as Skipton or Nationwide 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.