Indemnity Insurance of Lack of Building Regulation Approval Bank conveyancing instructions
Chelsea BS and Nationwide, in common with many banks, have their own requirements when it comes to lack of building regulation approval indemnity insurance. This page sets out to enlighten residential conveyancing practitioners on the numerous bank solicitors panel where the title to be charged contains lack of building regulation approval. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each lender, for example Birmingham Midshires, Yorkshire Bank Home Loans or Natwest. 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?
As a conveyancing practitioner on a mortgage company panel you must make appropriate searches and enquiries take all reasonable steps (including any further enquiries to clarify any issues which may arise) to ensure the residence or any works thereto has the benefit of any necessary Building Regulation Consent and that the property may be the subject of enforcement proceedings.
If 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 can provide an unconditional certificate of title, the mortgage company will not insist on lack of building regulation consent 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 Chelsea BS or Nationwide will adopt a different stance.
About Lack of Building Regulation Approval Indemnity Insurance
Lack of Building Regulation Approval Insurance is typically needed where no evidence of building regulation consent can be provided for extensions (or FENSA certificate for windows) that have existed for a year or more, whether a domestic property or large commercial project. The loss arises following successful enforcement proceedings by the local authority. In a typical conveyancing scenario the vendor would be expected to cover the costs of the Lack of Building Regulation Approval Indemnity Insurance, which would be taken out in the buyer’s name as well as the mortgage company.
A lack of building regulation approval indemnity insurance policy is usually cheaper than applying for retrospective consent and is certainly much quicker. The downside is that the risk of enforcement action does not disappear.
Godiva Mortgages and Accord in common with the majority of banks, requirements are that where lack of building regulation approval indemnity insurance is to be put on risk:
- you is duty bound to point out to the mortgagor 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 relation to the insurance
- the lack of building regulation approval indemnity insurance policy must be placed on risk at no cost to the bank
- the level of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your firm are responsible for approving the terms of the lack of building regulation approval policy on behalf of the lender
- your firm must send a duplicate of the lack of building regulation approval indemnity insurance to the borrower and explain to the borrower why the lack of building regulation approval indemnity insurance policy was effected and that a further policy might be required if there is additional lending against the mortgaged property
- the lack of building regulation approval indemnity insurance policy should not incorporate terms which you recognise would invalidate or compromise the interests of the lender
- the lack of building regulation approval indemnity insurance policy must be for the benefit of the mortgage company and, wherever possible, for the benefit of the borrower and any next owner or lender. If the borrower will not be covered by the lack of building regulation approval indemnity insurance policy, you must advise the mortgagor of this fact.
- your firm must disclose to the insurer all relevant information which you have obtained
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Barnsley 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. |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Habito | Higher of purchase price or valuation |
| Holmesdale Building Society | 110% |
| Landmark | 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. |
| 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. |
| Metro Bank | The open market value of the property according to the valuation report. |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| 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). |
| Tandem Bank | An amount at least equal to 110% of the purchase price or valuation – whichever is the greater. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
General Lack of Building Regulation Approval indemnity insurance points to consider
The full terms, conditions and exclusions for lack of building regulation approval indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners are obliged to point the borrower to the lack of building regulation approval indemnity insurance policy paperwork. Lack of Building Regulation Approval Contingency insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Important features and benefits of lack of building regulation approval Contingency insurance :
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the lack of building regulation approval indemnity insurance schedule. Lack of Building Regulation Approval indemnity insurance Cover normally includes- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, 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.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- The cost of altering or demolishing 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.
- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the lack of building regulation approval indemnity insurance.
- Cover for compensation incurred in any proceedings concerning the risks specified in the lack of building regulation approval indemnity insurance, including fees of a legal nature.
- Diminution in value due to the successful enforcement of the risks specified in the lack of building regulation approval insurance.
As with any insurance policy, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the lack of building regulation approval policy will not be valid.
Lack of Building Regulation Approval Indemnity Insurance has limitations - Supplemental considerations
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from lack of building regulation approval insurance may be adequate for your client.The content set out above covers to properties in England and Wales.