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

Natwest and Barnsley BS, as with the majority of mortgage companies, dictate their own requirements when it comes to lack of building regulation approval indemnity insurance. The purpose of this page to assist conveyancing practitioners on the numerous mortgage company approved list of panel lawyers where the title for the the property to be mortgaged incorporates lack of building regulation approval. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, be it Yorkshire Building Society, Leeds Building Society 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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Being a conveyancing practitioner on a lender panel you must enquire (including any supplemental investigations to clarify any issues which may arise) to ensure the residence or any works thereto has the appropriate Building Regulation Consent 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 judgment there is no reasonable prospect of enforcement action and, following reasonable enquiries, and you are content that there is a good and marketable title and can provide an unqualified COT, the mortgage company will not require lack of building regulation approval indemnity insurance and you may go ahead without it.

If 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 COT, you should disclose this to the bank in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each lender such as Natwest or Barnsley BS will take a different stance.

About Lack of Building Regulation Approval Indemnity Insurance

Lack of Building Regulation Approval Insurance is typically needed where no documentary evidence of building regulation consent can be provided for alterations (or FENSA certificate for windows) that have been in existence for for over a year, whether a residential 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 ordinarily cheaper than seeking retrospective certificate and is undoubtedly much quicker. The flipside is that the risk of enforcement action does not disappear.

Skipton and RBS in common with many mortgage companies, requirements are that where lack of building regulation approval indemnity insurance is to be taken out:

your firm is duty bound to 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 insurance
the lack of building regulation approval indemnity insurance policy should not contain terms that you recognise would invalidate or prejudice the interests of the lender
your practice are responsible for approving the terms of the lack of building regulation approval policy on behalf of the lender
the lack of building regulation approval indemnity insurance policy should be placed on risk without charge to the bank
you must send a duplicate 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 necessary if there is further lending against the mortgaged property
your firm must disclose to the insurer all relevant information which you have acquired
the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )
the lack of building regulation approval indemnity insurance policy needs to be for the benefit of the mortgage company and, if possible, in favour of the borrower and any next registered proprietor or mortgage company. If the mortgagor will not be covered by the lack of building regulation approval indemnity insurance policy, the borrower must be informed accordingly.

As to the level 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 CML handbook PII requirements for mortgage companies:

Lender	Requirement
Ahli United Bank	An amount equal to the value of the Mortgaged Property
Britannia	Cover to the full value of the property.
Capital Home Loans	An amount which is at least equal to the value or the purchase price of the property, whichever is the higher
Holmesdale Building Society	110%
Lloyds	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.
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.
Monmouthshire Building Society	The higher of the purchase price or valuation. For remortgages, the value of the advance.
National Counties Building Society	An amount at least equal to the mortgage advance.
Nedbank	You are to refer to us for specific instructions on any matter involving indemnity insurance.
Perenna	The higher of the purchase price or valuation.
Platform	110% of principal sum.
Progressive BS	The limit of indemnity insurance should be the purchase price or valuation - whichever is higher.
Rely Mortgages	An amount at least equal to 110% of the mortgage valuation.
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).
Swansea Building Society	Purchase price or market valuation 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 Works	The full purchase price/value of the property whichever is higher
Virgin	We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum.
Yorkshire 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.

Non lender-specific considerations

The extent of the terms for lack of building regulation approval indemnity insurance are shown in the policy paperwork. Property lawyers are obliged to point 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 provide indemnity in respect of the risks set out in the policy schedule - so you should check any draft to determine that it is as it should be. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the lack of building regulation approval indemnity insurance policy. Again, please check that this is as you expected.

Lack of Building Regulation Approval Contingency insurance: Significant features and benefits:

The policy 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

Cover for compensation incurred in any action concerning the risks specified in the lack of building regulation approval insurance, including incurred costs and expenses.
Expenses for 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 insurance, to the extent that such costs are rendered abortive by court order.
All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the lack of building regulation approval indemnity insurance.
Market value reduction due to the successful enforcement of the risks specified in the lack of building regulation approval indemnity insurance.
The cost 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.

Always consider what is not included in the lack of building regulation approval indemnity insurance e.g. does the policy cover any property that has been altered within the year prior to the commencement of the policy? Are legal costs covered?

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 policy which are not adequately covered by financial compensation.

Content on this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the mortgage company 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 covers to properties in England and Wales.