Indemnity Insurance of Lack of Building Regulation Approval Lender conveyancing instructions
Leeds Building Society and Barclays, in common with most banks, have their own specific instructions when it comes to lack of building regulation approval indemnity insurance. This page sets out to enlighten residential conveyancing lawyers on the different bank solicitors panel where the title to be charged contains lack of building regulation approval. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each lender, be it Yorkshire Building Society, Virgin Money or Accord. The information 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?
Being a solicitor on a lender panel you must investigate (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 proceedings.
If there is evidence of such a breach or matter but in your professional opinion there is no reasonable prospect of enforcement action and, following appropriate enquiries, and you are assured that there is a good and marketable title and are in a position to submit an unconditional certificate of title, the lender 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 unconditional certificate of title, you should disclose this to the bank in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as Leeds Building Society or Barclays may take a different approach.
About Lack of Building Regulation Approval Indemnity Insurance
Lack of Building Regulation Approval Insurance is typically required where no evidence of building regulation consent can be provided for extensions (or FENSA certificate for windows) that have existed for for over twelve months, whether a domestic property or large commercial project. The consequential losses flow from the successful enforcement proceedings 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 mortgage company.
A lack of building regulation approval indemnity insurance policy is normally more cost effective than gaining retrospective certificate and is certainly significantly quicker. The downside is that the risk of enforcement action still remains.
Lloyds TSB and Santander like many mortgage companies, obligations require that where lack of building regulation approval indemnity insurance is to be taken out:
- your firm are responsible for approving the terms of the lack of building regulation approval policy on behalf of the lender
- the level of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
- you must reveal to the insurer all relevant information which you have acquired
- the lack of building regulation approval indemnity insurance policy must be effected at no charge to the mortgage company
- the lack of building regulation approval indemnity insurance policy should not incorporate terms which you recognise would invalidate or compromise the interests of the bank
- your practice is duty bound to point out to the borrower that the borrower will need to adhere to any conditions of the lack of building regulation approval indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in relation to the policy
- you must provide 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 may be necessary if there is supplemental borrowing against the security of the property
- the lack of building regulation approval indemnity insurance policy needs to be for the benefit of the bank and, wherever possible, for the benefit of the mortgagor and any subsequent registered proprietor or bank. If the mortgagor will not be protected by the lack of building regulation approval indemnity insurance policy, the mortgagor needs to be advised accordingly.
| Lender | Requirement |
|---|---|
| April Mortgages | An amount at least equal to the mortgage advance. |
| 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. |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| 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. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| Habito | Higher of purchase price or valuation |
| Halifax | An amount at least equal to the mortgage advance. |
| Harpenden Building Society | 110% of mortgage advance |
| Leeds Building Society | An amount at least equal to the amount of the mortgage advance plus 10%. Any indemnity insurance policy must protect the borrowers, any successor in title and any Mortgagee. |
| 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. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| 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 -Natwest One | An amount equal to the value of the property. |
Non lender-specific considerations
The full terms, conditions and exclusions for lack of building regulation approval indemnity insurance are shown 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. The intention of lack of building regulation approval indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check the document to ensure it is in order. The continuance of this non-investment insurance contract 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 indemnity insurance: Significant 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 are likely to cover the following- Liability for damages or compensation incurred in any action regarding the risks specified in the lack of building regulation approval policy, including incurred costs and expenses.
- 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.
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the lack of building regulation approval policy.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Loss in market value resulting from the successful enforcement of the risks specified in the lack of building regulation approval policy.
- Expenses for works (including professional 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 order.
Due diligence should extend to checking 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 be sure that the insurer will check the details on any proposal form thoroughly before any claim is paid out.
Lack of Building Regulation Approval Indemnity Insurance has limitations - Other considerations
There may be consequences arising from the enforcement of the risks identified in the lack of building regulation approval indemnity insurance which are not adequately covered by financial compensation.The above information is in relation to properties in England and Wales.