Indemnity Insurance of Lack of Consent Mortgage Company conveyancing requirements

Barclays and RBS, in common with many banks, set their own specific instructions when it comes to lack of consent indemnity insurance. The content herein aims to help property law firms on the numerous mortgage company conveyancing panel where the title to be charged contains lack of consent. Solicitors should still check the CML handbook requirements for each mortgage company, be it Yorkshire Bank Home Loans, Natwest or Yorkshire Building Society. The information on this page Is not to be read as lack of consent indemnity insurance advice.

Need help with lack of consent indemnity insurance from your lender?

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Accord and Coventry BS like most lenders, obligations require that where lack of consent indemnity insurance is effected:

• the lack of consent indemnity insurance policy must be effected without expense to the mortgage company
• your practice is duty bound to spell out to the borrower that the borrower will need to adhere to any conditions of the lack of consent indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the insurance
• you is required to disclose to the insurer all relevant information which you have gathered
• the lack of consent indemnity insurance policy should always be in favor of the lender and, if possible, in favour of the mortgagor and any future registered proprietor or lender. If the borrower will not be protected by the lack of consent indemnity insurance policy, you must advise the mortgagor of this fact.
• your firm must supply a duplicate of the lack of consent indemnity insurance to the borrower and explain to the borrower why the lack of consent indemnity insurance policy was effected and that additional insurance may be mandatory if there is further borrowing against the security of the property
• the lack of consent indemnity insurance policy must not incorporate conditions which you know would void or compromise the interests of the lender
• your practice are responsible for approving the terms of the lack of consent policy on behalf of the lender
• the level of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )

As to the level of cover for the lack of consent indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for banks:

Lack of Consent Contingency Insurance : Reflections

The full terms, conditions and exclusions for lack of consent indemnity insurance are identified in the policy paperwork. Conveyancing solicitors should direct the borrower to the lack of consent indemnity insurance policy paperwork. Lack of Consent 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 correct. The continuance of this non-investment insurance contract is in perpetuity unless otherwise stated in the lack of consent indemnity insurance policy. Adequacy in this regard should be checked.

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Lack of Consent Contingency 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 Consent indemnity insurance Cover normally includes

• The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the lack of consent indemnity insurance, to the extent that such costs are rendered abortive by court decision.
• Reimbursement for compensation incurred in any proceedings regarding the risks specified in the lack of consent policy, as well as legal and associated costs.
• Money paid with the written consent of the insurance company to free the land from the risks specified in the lack of consent insurance.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• 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.
• Diminution in value resulting from the successful enforcement of the risks specified in the lack of consent insurance.

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Due diligence should extend to checking that the answers on the application form are accurate. However remote the likelihood of a claim on the lender 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 met.

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Lack of Consent Indemnity Insurance has limitations - Supplemental considerations

Lack of Consent insurance may satisfy lenders such as Bank of Scotland or Barnsley BS 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.

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The content set out above covers to properties in England and Wales.