Lender conveyancing panel requirements re Lack of Building Regulation Approval Indemnity Insurance
Nationwide and RBS, in common with most mortgage companies, dictate their own requirements when it comes to lack of building regulation approval indemnity insurance. This page sets out to enlighten property law practitioners on the different lender approved list of panel lawyers where the title to be charged includes lack of building regulation approval. It is not a alternative for checking the CML handbook requirements for each lender, for example Halifax, Yorkshire Bank Home Loans or Natwest. The information on this page Is not to be read as lack of building regulation approval indemnity insurance advice.
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Being a conveyancing lawyer on a mortgage company panel you must conduct due diligence as to (including any further investigations 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 action.
Where there is evidence of a lack of building regulation approval 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 in a position to submit an unconditional COT, 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 unconditional COT, you should report this to the bank in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each lender such as Nationwide or RBS may adopt a different approach.
About Lack of Building Regulation Approval Indemnity Insurance
Lack of Building Regulation Approval Cover is typically needed where no verification of building regulation consent can be provided for alterations (or FENSA certificate for windows) 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 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 bank.
A lack of building regulation approval indemnity insurance policy is in most cases less expensive than gaining retrospective certificate and is certainly much quicker. The downside is that the risk of enforcement action does not disappear.
Santander and Bank of Scotland in common with many 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 should not incorporate conditions which you know would void or prejudice the interests of the lender
- the limit of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- you must approve the terms of the lack of building regulation approval policy on behalf of the bank
- your practice must point out to the borrower that the borrower must comply with 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 respect of the policy
- your practice must send a copy of the lack of building regulation approval indemnity insurance to the mortgagor and explain to the mortgagor why the lack of building regulation approval indemnity insurance policy was effected and that additional insurance might be mandatory if there is further borrowing against the security of the property
- your firm must disclose to the insurer all relevant information which you have gathered
- the lack of building regulation approval indemnity insurance policy should be effected at no charge to the lender
- the lack of building regulation approval indemnity insurance policy needs to be in favor of the bank and, if possible, in favour of the borrower and any subsequent owner or mortgage company. Where the borrower will not be covered by the lack of building regulation approval indemnity insurance policy, the borrower should be informed accordingly.
| Lender | Requirement |
|---|---|
| Ahli United Bank | |
| Allied Irish Bank | |
| Bank of Ireland Mortgages | |
| Bank of Scotland | |
| Coventry Building Society | |
| Godiva Mortgages | |
| Halifax | |
| Harpenden Building Society | |
| ITL Mortgages | |
| JPMorgan | |
| Landbay Partners | |
| Landmark | |
| Magellan Homeloans | |
| Nationwide Building Society | |
| Nedbank | |
| New Street Mortgages | |
| Principality Building Society | |
| Saffron Building Society | |
| RBS- First Active | |
| RBS - Virgin One |
Lack of Building Regulation Approval Contingency Insurance : Reflections
The extent of the terms for lack of building regulation approval indemnity insurance are set out in the policy paperwork. Property lawyers should point your non-lender client to the lack of building regulation approval indemnity insurance policy itself. Lack of Building Regulation Approval indemnity insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to determine that it is in order. The duration 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.Significant aspects and benefits of lack of building regulation approval Contingency 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 Cover normally includes- Market value reduction resulting from the successful enforcement of the risks specified in the lack of building regulation approval indemnity insurance.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- 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 insurance.
- Reimbursement for compensation incurred in any action regarding the risks specified in the lack of building regulation approval insurance, as well as legal and associated costs.
- The cost of works (including professional 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.
- 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.
As is the case with all conventional insurance, 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.
Further considerations for lack of building regulation approval indemnity insurance
There may be consequences arising from the enforcement of the risks identified in the lack of building regulation approval insurance which are not adequately covered by financial compensation.The content set out above is in relation to properties in England and Wales.