Improvement Grant Liability Indemnity Insurance Lender conveyancing requirements

HSBC and Barclays, in common with most mortgage companies, have their own specific instructions when it comes to improvement grant liability indemnity insurance. This page is designed to help property law firms on the various bank conveyancing panel where the title for the the property to be mortgaged contains improvement grant liability. It is not a alternative for checking the CML handbook requirements for each mortgage company, for example Halifax, Accord or Lloyds TSB. 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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Coventry BS and Yorkshire Bank Home Loans like most lenders, instructions are such that where improvement grant liability indemnity insurance is to be put on risk:

• the improvement grant liability indemnity insurance policy must be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any next registered proprietor or bank. If the borrower will not be protected by the improvement grant liability indemnity insurance policy, you must advise the mortgagor of this fact.
• the minimum level of cover for the policy must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• you must approve the terms of the improvement grant liability policy on behalf of the bank
• you is duty bound to point out to the borrower 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 respect of the insurance
• the improvement grant liability indemnity insurance policy must not contain terms which you know would void or prejudice the interests of the lender
• the improvement grant liability indemnity insurance policy should be placed on risk at no expense to the lender
• your practice must provide a copy of the improvement grant liability indemnity insurance to the borrower and explain to the borrower why the improvement grant liability indemnity insurance policy was effected and that additional insurance may be mandatory if there is additional lending against the security of the property
• your firm is obliged to disclose to the insurer all relevant information which you have acquired

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:

Non lender-specific considerations

The extent of the terms for improvement grant liability indemnity insurance are explained in the policy document. Conveyancing solicitors are obliged to point the borrower to the improvement grant liability indemnity insurance policy document. The intention of improvement grant liability indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to ensure it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.

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Improvement Grant Liability indemnity insurance: Important aspects 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

• Money paid with consent in writing from the insurance company to free the property from the risks specified in the improvement grant liability policy.
• Market value reduction due to the successful enforcement of the risks specified in the improvement grant liability indemnity insurance.
• Cover for compensation incurred in any proceedings in respect of the risks specified in the improvement grant liability indemnity insurance, including fees of a legal nature.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
• 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.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to 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.

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Always consider what is excluded from the improvement grant liability indemnity insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the commencement of the policy? Are legal costs covered?

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Improvement Grant Liability Indemnity Insurance has limitations - Further considerations

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

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The above information is in relation to properties in England and Wales.