Bank conveyancing panel requirements re Improvement Grant Liability Indemnity Insurance

Skipton and Santander, like most lenders, set their own specific instructions when it comes to improvement grant liability indemnity insurance. This page sets out to enlighten domestic conveyancing solicitors on the different mortgage company conveyancing panel where the title to be charged contains improvement grant liability. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each bank, for example Lloyds TSB, Yorkshire Bank Home Loans or Halifax. The information on this page is not focused on improvement grant liability indemnity insurance requirements.

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

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HSBC and Bank of Scotland in common with most lenders, instructions are such that where improvement grant liability indemnity insurance is to be taken out:

• your practice must point out 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 insurance
• the limit of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• your firm must provide a duplicate of the improvement grant liability indemnity insurance to the borrower and explain to the mortgagor 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
• the improvement grant liability indemnity insurance policy should always be in favor of the bank and, wherever possible, in favour of the mortgagor 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 mortgagor of this fact.
• the improvement grant liability indemnity insurance policy must not contain conditions which you know would void or compromise the interests of the mortgage company
• your firm are responsible for approving the terms of the improvement grant liability policy on behalf of the lender
• your firm is obliged to disclose to the insurer all relevant information which you have gathered
• the improvement grant liability indemnity insurance policy must be placed on risk without expense to the bank

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 Section 9.2 of the CML handbook PII requirements for mortgage companies:

Improvement Grant Liability Contingency Insurance : Reflections

The full terms, conditions and exclusions for improvement grant liability indemnity insurance are shown in the policy paperwork. 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 grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to ensure it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the improvement grant liability indemnity insurance policy. Again, please check that this is as you expected.

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Improvement Grant Liability indemnity insurance: Significant features and benefits:

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 Cover normally includes

• The cost of works (including professional fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the improvement grant liability indemnity insurance, to the extent that such costs are rendered abortive by court decision.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the improvement grant liability insurance.
• The cost 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 action regarding the risks specified in the improvement grant liability insurance, including legal and associated costs.
• Diminution in value due to 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. 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 thoroughly before any claim is admitted.

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Additional considerations for improvement grant liability indemnity insurance

Improvement Grant Liability Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that improvement grant liability indemnity cover will not necessarily be the right solution.

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