Mortgage Company conveyancing panel requirements re Improvement Grant Liability Indemnity Insurance

Godiva Mortgages and Yorkshire Building Society, like most banks, have their own specific instructions when it comes to improvement grant liability indemnity insurance. This page sets out to enlighten property law practitioners on the different bank conveyancing panel where the title to be charged includes improvement grant liability. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be Skipton, Leeds Building Society or Accord. 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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Coventry BS and Virgin Money in common with many mortgage companies, requirements are that where improvement grant liability indemnity insurance is effected:

• the limit of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• your firm must approve the terms of the improvement grant liability policy on behalf of the mortgage company
• your practice must reveal to the insurer all relevant information which you have obtained
• your firm is duty bound to explain to the mortgagor that the borrower is obliged to comply with any conditions of the improvement grant liability indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the policy
• the improvement grant liability indemnity insurance policy should always be in favor of the lender and, if possible, for the benefit of the borrower and any next registered proprietor or mortgage company. If the mortgagor will not be covered by the improvement grant liability indemnity insurance policy, you must advise the borrower of this fact.
• the improvement grant liability indemnity insurance policy should be effected at no expense to the lender
• the improvement grant liability indemnity insurance policy must not incorporate terms which you are aware would invalidate or compromise the interests of the mortgage company
• your firm 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 a further policy may be mandatory if there is supplemental borrowing against the mortgaged property

Regarding the extent of cover for the improvement grant liability indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the Part 2 requirements for mortgage companies:

Non lender-specific considerations

The full terms, conditions and exclusions for improvement grant liability indemnity insurance are shown in the policy document. Conveyancing solicitors should direct your non-lender client to the improvement grant liability indemnity insurance policy document. Improvement Grant Liability indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to determine that it is in order. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the improvement grant liability indemnity insurance policy. Adequacy in this regard should be checked.

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Improvement Grant Liability indemnity insurance: Important aspects and benefits:

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. Improvement Grant Liability indemnity insurance Policies are likely to cover the following

• Expenses for works (including professional fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the improvement grant liability policy, to the extent that such costs are rendered abortive by court decision.
• Reimbursement for compensation incurred in any proceedings concerning the risks specified in the improvement grant liability policy, including fees of a legal nature.
• All sums paid with the written consent of the insurance company to free the property from the risks specified in the improvement grant liability indemnity insurance.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• Diminution in value due to the successful enforcement of the risks specified in the improvement grant liability insurance.
• The cost 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.

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As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the improvement grant liability policy will be invalidated.

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Improvement Grant Liability Indemnity Insurance has limitations - Additional considerations

Improvement Grant Liability Indemnity insurance isn’t a solution to all of the relevant problems.

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