Insolvency Act Indemnity Insurance Mortgage Company conveyancing requirements
Barnsley BS and Yorkshire Building Society, in common with most lenders, dictate their own specific instructions when it comes to insolvency act indemnity insurance. The content herein aims to help residential conveyancing lawyers on the different bank conveyancing panel where the title for the the property to be mortgaged incorporates insolvency act. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Nationwide, Barclays or Chelsea BS. The information on this page is not focused on insolvency act indemnity insurance requirements.
Need help with insolvency act indemnity insurance from your lender?
Undertaking property work as a conveyancing practitioner on a lender panel, you must notify to the lender if you are aware that the title to the property was subject to a Insolvency Act or a transaction at an apparent undervalue completed within 5 years of the proposed mortgage. You need to be sure that the mortgage company will not be compromised under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. If you are unable to provide an unqualified certificate of title, you must put in place transfer at undervalue or Insolvency Act indemnity insurance.
Please remember to obtain clear bankruptcy searches against all parties to any deed of gift or transaction with the potential of being regarded at an undervalue.
About Insolvency Act Indemnity Insurance
Insolvency Act Insurance is normally required owing to an expected or existing transfer at undervalue or deed of gift including gifts of money towards the buying of a property. The potential loss arises where the person who transferred or “gifted” the property (or the money) becomes bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.
Halifax and Virgin Money in common with many lenders, requirements are that where insolvency act indemnity insurance is to be taken out:
- the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the insolvency act indemnity insurance policy must be in favor of the bank and, wherever possible, in favour of the borrower and any next registered proprietor or bank. Where the mortgagor will not be protected by the insolvency act indemnity insurance policy, you must advise the mortgagor of this fact.
- your practice are responsible for approving the terms of the insolvency act policy on behalf of the bank
- the insolvency act indemnity insurance policy should be effected without charge to the mortgage company
- the insolvency act indemnity insurance policy should not contain conditions that you are aware would invalidate or prejudice the interests of the lender
- you is duty bound to spell out to the mortgagor that the borrower must comply with any conditions of the insolvency act indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the policy
- your firm must supply a copy of the insolvency act indemnity insurance to the borrower and explain to the mortgagor why the insolvency act indemnity insurance policy was effected and that additional insurance could be necessary if there is supplemental lending against the mortgaged property
- you is obliged to reveal to the insurer all relevant information which you have gathered
| Lender | Requirement |
|---|---|
| Accord Buy to Let | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage and also the borrower(s). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Chelsea Building Society | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| First Direct | The value of the insurance must be for at least the full value of the property |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Hodge Equity Release | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| NRAM Ltd | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| St James Place | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| RBS - Direct Line | An amount equal to the value of the property. |
| Topaz Finance | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
Insolvency Act Contingency Insurance : Reflections
The extent of the terms for insolvency act indemnity insurance are shown in the policy paperwork. Conveyancing solicitors are obliged to point your non-lender client to the insolvency act indemnity insurance policy itself. Insolvency Act indemnity insurance is designed to grant indemnity in respect of the risks specified in the policy schedule - so it is essential check the schedule to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the insolvency act indemnity insurance policy. Adequacy in this regard should be checked.Insolvency Act Contingency insurance: Important 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. Insolvency Act indemnity insurance Cover normally includes- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- All sums paid with consent in writing from the insurance company to liberate the property from the risks specified in the insolvency act indemnity insurance.
- 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 professional fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the insolvency act indemnity insurance, to the extent that such costs are rendered abortive by court decision.
- Liability for damages or compensation incurred in any proceedings concerning the risks specified in the insolvency act indemnity insurance, including incurred costs and expenses.
- Loss in market value resulting from the successful enforcement of the risks specified in the insolvency act indemnity insurance.
Don't forget to check what is excluded from the insolvency act 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? Does it cover legal costs?
Further considerations for insolvency act indemnity insurance
Insolvency Act 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 insolvency act indemnity cover will not necessarily be the answer. Content on this webpage is for general information for Regulated law firms in England and Wales on the the lender conveyancing panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the bank indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most insolvency act Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The above information is in relation to properties in England and Wales.