Lack of Building Regulation Approval Indemnity Insurance Mortgage Company conveyancing requirements

Barnsley BS and HSBC, in common with most lenders, dictate their own requirements when it comes to lack of building regulation approval indemnity insurance. The purpose of this page to assist conveyancing lawyers on the numerous bank solicitors panel where the title for the the property to be mortgaged incorporates lack of building regulation approval. It is not a substitute for checking the CML handbook requirements for each lender, be it Accord, Yorkshire Bank Home Loans or Nationwide. The content on this page Is not to be read as lack of building regulation approval indemnity insurance advice.

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In your capacity as a property lawyer on a lender panel you must make appropriate searches and enquiries take all reasonable steps (including any supplemental investigations to clarify any issues which may arise) to ensure the premises or any works thereto has the benefit of any necessary Building Regulation Consent and that the property may be the subject of enforcement action.

If there is evidence of such a breach or matter but in your professional judgment there is no reasonable likelihood of enforcement action and, following appropriate enquiries, and you are content that that the title is uncompromised and are able to issue an unqualified certificate of title, the mortgage company may not insist on 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 unconditional 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 Barnsley BS or HSBC may adopt a different approach.

About Lack of Building Regulation Approval Indemnity Insurance

Lack of Building Regulation Approval Indemnity Insurance is typically needed where no evidence of building regulation consent can be supplied for extensions (or FENSA certificate for doors) that have been in existence for for over a year, whether a residential premises or large commercial project. The consequential losses flow from the successful enforcement action by the local authority. In a typical conveyancing scenario the owner 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 bank.

A lack of building regulation approval indemnity insurance policy is usually cheaper than obtaining retrospective certificate and is without question much quicker. The flipside is that the risk of enforcement action does not disappear.

Chelsea BS and Santander as with most lenders, instructions are such that where lack of building regulation approval indemnity insurance is effected:

the minimum level of cover for the policy must satisfy the requirements for the lender (See Part II Handbook requirements )
your practice are responsible for approving the terms of the lack of building regulation approval policy on behalf of the bank
the lack of building regulation approval indemnity insurance policy should be effected without cost to the mortgage company
your practice is obliged to reveal to the insurer all relevant information which you have gathered
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 additional insurance might be required if there is supplemental lending against the security of the property
the lack of building regulation approval indemnity insurance policy must not incorporate terms which you know would invalidate or compromise the interests of the lender
the lack of building regulation approval indemnity insurance policy needs to be for the benefit of the bank and, if possible, for the benefit of the mortgagor and any subsequent owner or mortgagee. Where the mortgagor will not be covered by the lack of building regulation approval indemnity insurance policy, you must advise the mortgagor of this fact.
your practice must spell out to the borrower that the borrower is obliged to adhere to any conditions of the lack of building regulation approval indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in respect of the policy

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 Paragraph 9.2 of the Part 2 requirements for banks:

Lender	Requirement
Accord Mortgages	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.
Bank of Scotland	Not less than mortgage advance plus 10%
First Direct	The value of the insurance must be for at least the full value of the property
Foundation Home loans	An amount equal to 110% of the valuation or purchase price - whichever is the greater.
Halifax Loans	An amount at least equal to the mortgage advance.
Harpenden Building Society	110% of mortgage advance
Hinckley and Rugby	The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest.
Investec	The open market value of the property according to the valuation report.
Lloyds	The value of the property.
Lloyds	The value of the property.
Lloyds TSB Scotland	The value of the property
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.
National Counties Building Society	An amount at least equal to the mortgage advance.
National Westminster Bank	An amount equal to the value of the property.
Paragon Mortgages Ltd	An amount at least equal to the stated value of the Property.
Platform	110% of principal sum.
Santander	The purchase price or (if lower) 110% of the mortgage advance.
State Bank of India UK	The purchase price or value of the property, whichever is the higher.
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.
Whistletree	The value of the property

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 set out in the policy paperwork. Conveyancing Practitioners are obliged to direct your non-lender client to the lack of building regulation approval indemnity insurance policy paperwork. Lack of Building Regulation Approval indemnity insurance is devised to grant indemnity in respect of the risks specified in the policy schedule - so you should check any draft to determine that it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.

Important features and benefits of lack of building regulation approval indemnity insurance :

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. Lack of Building Regulation Approval indemnity insurance Policies are likely to cover the following

Expenses for 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 order.
Loss in market value resulting from the successful enforcement of the risks specified in the lack of building regulation approval insurance.
The cost 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.
Money paid with consent in writing from the insurance company to free the property from the risks specified in the lack of building regulation approval indemnity insurance.
Reimbursement for compensation incurred in any action in respect of the risks specified in the lack of building regulation approval policy, including legal and associated costs.
All other 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 accurate. Regardless of how remote a claim on the bank insurance policy might be you can rest assured that the insurer will check the details on any proposal form very carefully prior to any claim being admitted.

Lack of Building Regulation Approval Indemnity Insurance has limitations - Further 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.

Information provided on this webpage is for general information for conveyancers and solicitors in England and Wales on the the bank approved 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 content set out above covers to properties in England and Wales.