Bank conveyancing panel conditions re Lack of Building Regulation Approval Indemnity Insurance

Skipton and HSBC, like the majority of mortgage companies, set their own specific instructions when it comes to lack of building regulation approval indemnity insurance. This page is designed to help conveyancing practitioners on the different mortgage company solicitors panel where the title for the the property to be mortgaged incorporates lack of building regulation approval. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Leeds Building Society, Bank of Scotland or RBS. The information on this page Is not to be read as lack of building regulation approval indemnity insurance advice.

Need help with lack of building regulation approval indemnity insurance from your lender?

Find a Solicitor Find a Mortgage Broker Find More Help

In your capacity as a property lawyer on a bank panel you must enquire (including any additional enquiries to clarify any issues which may arise) to ensure the property or any works thereto has the appropriate Building Regulation Approval and that the property may be the subject of enforcement proceedings.

Where there is evidence of such a breach or matter but in your professional opinion there is no reasonable likelihood of enforcement action and, following appropriate enquiries, and you are content that the title is good and marketable and are able to issue an unqualified certificate of title, the mortgage company may not require lack of building regulation approval indemnity insurance and you may proceed.

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 certificate of title, you should notify this to the bank in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each mortgage company such as Skipton or HSBC will take a different approach.

About Lack of Building Regulation Approval Indemnity Insurance

Lack of Building Regulation Approval Insurance is typically needed where no proof of building regulation consent can be supplied for works (or FENSA certificate for doors) that have existed for 12 months or more, whether a residential premises or large commercial project. The loss arises following successful enforcement action by the local authority. In a typical conveyancing scenario the vendor 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 usually less expensive than obtaining retrospective consent and is certainly significantly quicker. The downside is that the risk of enforcement action does not disappear.

Barclays and Yorkshire Bank Home Loans in common with most banks, instructions are such that where lack of building regulation approval indemnity insurance is to be taken out:

the lack of building regulation approval indemnity insurance policy must be in favor of the mortgage company and, if possible, in favour of the borrower and any next owner or lender. If the borrower will not be protected by the lack of building regulation approval indemnity insurance policy, you must advise the mortgagor of this fact.
the level of indemnity must meet the requirements for the bank (See Part II Handbook requirements )
you are responsible for approving the terms of the lack of building regulation approval policy on behalf of the lender
your firm must send a copy of the lack of building regulation approval indemnity insurance to the borrower and explain to the mortgagor why the lack of building regulation approval indemnity insurance policy was effected and that a further policy might be mandatory if there is further lending against the security of the property
your firm is required to disclose to the insurer all relevant information which you have obtained
the lack of building regulation approval indemnity insurance policy must not incorporate terms that you are aware would void or prejudice the interests of the bank
the lack of building regulation approval indemnity insurance policy must be placed on risk without cost to the mortgage company
your practice is duty bound to explain to the borrower that the borrower is obliged to comply with any conditions of the lack of building regulation approval indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the insurance

Regarding the extent of cover for the lack of building regulation approval indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for mortgage companies:

Lender	Requirement
Adam & Company International	The open market value of the property according to the valuation report.
Atom Bank	At least the open market value of the property according to the valuation report.
DB UK Bank	An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable
HSBC UK Bank	The value of the insurance must be for at least the full value of the property
Habito	Higher of purchase price or valuation
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.
Holmesdale Building Society	110%
Legal & General Home Finance	The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns.
LendInvest	An amount at least equal to the valuation of the property.
Magellan Homeloans	At least equal to the value of the property
ModaMortgages	An amount at least equal to 110% of the mortgage valuation.
Molo Finance 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 mortgages.
Paragon Residential	An amount at least equal to the stated value of the Property.
Saffron Building Society	Higher of purchase price or valuation. 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).
Secure Trust Bank	An amount at least equal to the market value. 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).
State Bank of India UK	The purchase price or value of the property, whichever is the higher.
Tandem Bank	An amount at least equal to 110% of the purchase price or valuation – whichever is the greater.
The Mortgage Lender	An amount at least equal to the mortgage advance.

Lack of Building Regulation Approval Contingency Insurance : Reflections

The full terms, conditions and exclusions for lack of building regulation approval indemnity insurance are set out in the policy paperwork. Conveyancing solicitors should point the borrower to the lack of building regulation approval indemnity insurance policy paperwork. Lack of Building Regulation Approval indemnity insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so you should check any draft to determine that it is in order. The continuance 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.

Lack of Building Regulation Approval Contingency 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. Lack of Building Regulation Approval indemnity insurance Policies should be checked for the following

The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the lack of building regulation approval indemnity insurance, to the extent that such costs are rendered abortive by court decision.
Cover for compensation incurred in any proceedings concerning the risks specified in the lack of building regulation approval indemnity insurance, as well as fees of a legal nature.
Market value reduction resulting from the successful enforcement of the risks specified in the lack of building regulation approval insurance.
Money paid with consent in writing from the insurance company to liberate the land from the risks specified in the lack of building regulation approval indemnity insurance.
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.
All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company

Due diligence should extend to checking that the answers on the application form are correct. However remote the likelihood of a claim on the lender insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly before any claim is met.

Lack of Building Regulation Approval Indemnity Insurance has limitations - Supplemental considerations

Lack of Building Regulation Approval insurance may satisfy lenders such as Nationwide or Virgin Money and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.

Information contained within this webpage is for general information for conveyancers and solicitors in England and Wales on the the lender solicitor 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 lack of building regulation approval 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.