Lack of Building Regulation Approval Indemnity Insurance Mortgage Company conveyancing requirements

Santander and Halifax, as with the majority of mortgage companies, have 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 different mortgage company conveyancing panel where the title to be charged incorporates lack of building regulation approval. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, for example Godiva Mortgages, Yorkshire Bank Home Loans or Leeds Building Society. 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 property lawyer on a lender panel you must investigate (including any further enquiries 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.

If there is evidence of a lack of building regulation approval but in your professional opinion there is no reasonable prospect of enforcement action and, following reasonable enquiries, and you are assured that there is a good and marketable title and are in a position to submit an unqualified certificate of title, the mortgage company will not insist on lack of building regulation consent indemnity insurance and you may proceed.

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 certificate of title, you should reveal this to the lender in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each mortgage company such as Santander or Halifax will take a different approach.

About Lack of Building Regulation Approval Indemnity Insurance

Lack of Building Regulation Approval Indemnity Insurance is typically required where no evidence of building regulation consent can be provided for works (or FENSA certificate for doors) that have been in existence for for over a year, whether a residential residence or large commercial project. The consequential losses flow from the successful enforcement proceedings 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 lender.

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

Chelsea BS and HSBC in common with the majority of banks, requirements are that where lack of building regulation approval indemnity insurance is effected:

the lack of building regulation approval indemnity insurance policy must not contain conditions which you recognise would void or compromise the interests of the mortgage company
your practice must supply 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 may be required if there is additional borrowing against the security of the property
the level of indemnity must satisfy the requirements for the bank (See Part II Handbook requirements )
the lack of building regulation approval indemnity insurance policy must be effected at no expense to the bank
the lack of building regulation approval indemnity insurance policy must be in favor of the mortgage company and, if possible, for the benefit of the borrower and any future owner or mortgage company. Where the mortgagor will not be covered by the lack of building regulation approval indemnity insurance policy, the mortgagor should be informed accordingly.
your firm must approve the terms of the lack of building regulation approval policy on behalf of the bank
your practice is duty bound to spell out to the mortgagor that the borrower is obliged to adhere to 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 respect of the policy
you must reveal to the insurer all relevant information which you have obtained

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 lenders:

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.
Aldermore Bank	110% of the purchase price or valuation, whichever is greater. 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale.
Bank of Ireland	The limit of indemnity must be an amount not less than the market value of the property.
Better HomeOwnership	An amount to cover the mortgage advance as a minimum.
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
Furness Building Society	Property valuation or purchase price, whichever the greater.
Godiva Mortgages	Minimum of the value of the property.
MPowered Mortgages	Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher).
Magellan Homeloans	At least equal to the value of the property
ModaMortgages	An amount at least equal to 110% of the mortgage valuation.
Nedbank	You are to refer to us for specific instructions on any matter involving indemnity insurance.
Parity Trust	An amount equal to at least 110% of the mortgage advance
Rooftop Mortgages	The value of the property for mortgage purposes as disclosed in the valuation.
Scottish Building Society	Amount of mortgage plus 25%.
State Bank of India UK	The purchase price or value of the property, whichever is the higher.
The Mortgage Works	The full purchase price/value of the property whichever is higher
RBS - Direct Line	An amount equal to the value of the property.
Royal Bank of Scotland -Natwest One	An amount equal to the value of the property.
Yorkshire Bank	Open market value of property.

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 direct your non-lender client to the lack of building regulation approval indemnity insurance policy document. Lack of Building Regulation Approval Contingency insurance is designed to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to determine that 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. It is well worth checking that the time frame is correct.

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

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 should be checked for the following

All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
The cost of works (including architects’ and surveyors’ fees) for the purpose of the development commenced, before the commencement of 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.
Reimbursement for compensation incurred in any proceedings in respect of the risks specified in the lack of building regulation approval policy, as well as fees of a legal nature.
Diminution in value due to the successful enforcement of the risks specified in the lack of building regulation approval policy.
All sums 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.
The out of pocket expenses 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.

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 be invalidated.

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

Lack of Building Regulation Approval insurance may satisfy lenders such as Coventry BS or Lloyds TSB and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.

Information provided on this webpage is for general information for conveyancers and solicitors in England and Wales on the the lender conveyancing 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.