Indemnity Insurance of Lack of Consent Mortgage Company conveyancing obligations

Coventry BS and Halifax, like many banks, have their own requirements when it comes to lack of consent indemnity insurance. This page sets out to enlighten conveyancing firms on the numerous bank approved list of panel lawyers where the title for the the property to be mortgaged includes lack of consent. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Nationwide, Chelsea BS or Lloyds TSB. The information on this page is not focused on lack of consent indemnity insurance requirements.

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

---

Birmingham Midshires and Santander like many banks, instructions are such that where lack of consent indemnity insurance is effected:

• your practice is obliged to disclose to the insurer all relevant information which you have obtained
• you is duty bound to explain to the borrower that the borrower must adhere to any conditions of the lack of consent indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the policy
• the minimum level of cover for the policy must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
• your firm are responsible for approving the terms of the lack of consent policy on behalf of the lender
• the lack of consent indemnity insurance policy should not contain conditions which you know would void or prejudice the interests of the lender
• your firm must provide a copy of the lack of consent indemnity insurance to the mortgagor and explain to the borrower why the lack of consent indemnity insurance policy was effected and that additional insurance may be required if there is supplemental borrowing against the mortgaged property
• the lack of consent indemnity insurance policy must be for the benefit of the bank and, if possible, for the benefit of the borrower and any next owner or bank. If the borrower will not be covered by the lack of consent indemnity insurance policy, the borrower should be advised accordingly.
• the lack of consent indemnity insurance policy must be placed on risk at no expense to the lender

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 Paragraph 9.2 of the CML handbook PII requirements for lenders:

Non lender-specific considerations

The extent of the terms for lack of consent indemnity insurance are identified in the policy document. Conveyancing Practitioners are obliged to direct your non-lender client to the lack of consent indemnity insurance policy paperwork. Lack of Consent indemnity insurance is designed to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to determine that it is correct. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.

---

Important aspects and benefits of lack of consent 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 Consent indemnity insurance Policies are likely to cover the following

• Diminution in value resulting from the successful enforcement of the risks specified in the lack of consent insurance.
• 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.
• The cost of works (including architects’ and surveyors’ 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 consent policy, to the extent that such costs are rendered abortive by court decision.
• Cover for compensation incurred in any proceedings in respect of the risks specified in the lack of consent insurance, including fees of a legal nature.
• Money paid with the written consent of the insurance company to free the property from the risks specified in the lack of consent insurance.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company

---

Don't forget to check what is not included in the lack of consent insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the policy being put on risk? Does it cover legal costs?

---

Further considerations for lack of consent indemnity insurance

Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from lack of consent insurance may be adequate for your client.

---

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