Lender conveyancing panel requirements re Lack of Building Regulation Approval Indemnity Insurance
Barclays and Accord, as with most mortgage companies, have their own requirements when it comes to lack of building regulation approval indemnity insurance. This page is designed to help conveyancing lawyers on the various mortgage company approved list of panel lawyers where the title for the the property to be mortgaged contains lack of building regulation approval. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each lender, be it Virgin Money, Yorkshire Bank Home Loans or Godiva Mortgages. The content on this page is not focused on lack of building regulation approval indemnity insurance requirements.
Need help with lack of building regulation approval indemnity insurance from your lender?
In your capacity as a conveyancing lawyer on a mortgage company panel you must make appropriate searches and enquiries take all reasonable steps (including any additional investigations to clarify any issues which may arise) to ensure the residence or any works thereto has the benefit of any necessary Building Regulation Approval and that the property may be the subject of enforcement action.
Where there is evidence of such a breach or matter but in your professional judgment there is no reasonable prospect of enforcement action and, following appropriate enquiries, and you are content that there is a good and marketable title and are in a position to submit an unconditional certificate of title, the bank will not require lack of building regulation approval indemnity insurance and you may go ahead without it.
Where there is such evidence that not all building regulation approvals will be in place on completion, where you are not able to provide an unqualified COT, you should report this to the lender in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each lender such as Barclays or Accord will take a different stance.
About Lack of Building Regulation Approval Indemnity Insurance
Lack of Building Regulation Approval Indemnity Insurance is typically needed where no proof of building regulation consent can be provided for extensions (or FENSA certificate for windows) that have existed for a year or more, whether a residential property or large commercial project. The consequential losses flow from the successful enforcement action by the local authority. In a typical conveyancing scenario the seller would be expected to pay the premium for the Lack of Building Regulation Approval Indemnity Insurance, which would be taken out in the buyer’s name as well as the lender.
A lack of building regulation approval indemnity insurance policy is ordinarily cheaper than obtaining retrospective certificate and is without question significantly quicker. The flipside is that the risk of enforcement action does not disappear.
Leeds Building Society and Nationwide as with most mortgage companies, obligations require that where lack of building regulation approval indemnity insurance is to be put on risk:
- you is obliged to disclose to the insurer all relevant information which you have acquired
- your practice must provide a duplicate of the lack of building regulation approval indemnity insurance to the mortgagor and explain to the borrower why the lack of building regulation approval indemnity insurance policy was effected and that additional insurance might be necessary if there is supplemental lending against the security of the property
- the lack of building regulation approval indemnity insurance policy must not contain terms that you are aware would invalidate or compromise the interests of the mortgage company
- the lack of building regulation approval indemnity insurance policy needs to be in favor of the lender and, wherever possible, in favour of the borrower and any future owner or mortgagee. Where the borrower will not be covered by the lack of building regulation approval indemnity insurance policy, the borrower needs to be informed accordingly.
- you are responsible for approving the terms of the lack of building regulation approval policy on behalf of the mortgage company
- the lack of building regulation approval indemnity insurance policy should be placed on risk without charge to the bank
- the level of indemnity must meet the requirements for the bank (See Part II Handbook requirements )
- you must point out to the borrower that the borrower will need to comply with any conditions of the lack of building regulation approval indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the insurance
| Lender | Requirement |
|---|---|
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Britannia | Cover to the full value of the property. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| First Direct | The value of the insurance must be for at least the full value of the property |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Halifax | An amount at least equal to the mortgage advance. |
| Hampden | The open market value of the property according to the valuation report. |
| Hodge | 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. |
| JPMorgan | 110% of principal sum. |
| Lloyds | The value of the property. |
| Magellan Homeloans | At least equal to the value of the property |
| Masthaven Bank | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| 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. |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| 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. |
| Yorkshire 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. |
Non lender-specific considerations
The full terms, conditions and exclusions for lack of building regulation approval indemnity insurance are explained in the policy document. Conveyancing Practitioners should point the borrower to the lack of building regulation approval indemnity insurance policy document. Lack of Building Regulation Approval Contingency 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 ensure it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the lack of building regulation approval indemnity insurance policy. Adequacy in this regard should be checked.Important aspects and benefits of lack of building regulation approval indemnity insurance :
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. Lack of Building Regulation Approval indemnity insurance Policies should be checked for the following- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the lack of building regulation approval policy, to the extent that such costs are rendered abortive by court decision.
- Reimbursement for compensation incurred in any action in respect of the risks specified in the lack of building regulation approval indemnity insurance, including legal and associated costs.
- Money paid with consent in writing from the insurance company to liberate the property from the risks specified in the lack of building regulation approval insurance.
- Market value reduction due to the successful enforcement of the risks specified in the lack of building regulation approval policy.
- The out of pocket expenses of altering or destroying 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.
You also need to be sure that the answers on the application form are correct. However remote the likelihood of a claim on the bank insurance policy might be you can rest assured that the insurer will check the details on any proposal form thoroughly prior to any claim being admitted.
Lack of Building Regulation Approval Indemnity Insurance has limitations - Other considerations
Lack of Building Regulation Approval 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 lack of building regulation approval indemnity cover will not necessarily be the answer.The above information is in relation to properties in England and Wales.