Lack of Planning Permission Indemnity Insurance Lender conveyancing requirements
Virgin Money and Barclays, like many lenders, set their own specific instructions when it comes to lack of planning permission indemnity insurance. This page is designed to help conveyancing lawyers on the numerous lender approved list of panel lawyers where the title for the the property to be mortgaged includes lack of planning permission. It is not a alternative for checking the CML handbook requirements for each mortgage company, be it Natwest, Accord or Yorkshire Bank Home Loans. The content on this page Is not to be read as lack of planning permission indemnity insurance advice.
Need help with lack of planning permission indemnity insurance from your lender?
In your capacity as a property lawyer on a lender panel you must conduct due diligence as to (including any supplemental queries to clarify any issues which may arise) to ensure the property has the benefit of any necessary planning permissions (including listed building consent) for its construction and any subsequent change to the property and its current use; and there is no apparent breach of the conditions of that or any other consent or certificate affecting the property; and that no matter is revealed which would preclude the residence from being utilised as residential property or 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 assured that that the title is uncompromised and are able to issue an unconditional certificate of title, the mortgage company will not insist on Lack of Planning Permission indemnity insurance and you may proceed.
Where there is such evidence and all outstanding conditions will not be satisfied by completion, where you are not able to provide an unconditional certificate of title, you should report this to the mortgage company in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each mortgage company such as Virgin Money or Barclays will take a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Cover is typically needed where there is no documentary evidence of compliance with conditions can be produced for works 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 owner would be expected to pay the premium for the Lack of Planning Permission Indemnity Insurance, which would be taken out in the purchaser’s name as well as the bank.
A lack of planning permission indemnity insurance policy is in most cases more cost effective than seeking retrospective approval and is without question significantly quicker. The flipside is that the risk of enforcement action does not disappear.
Leeds Building Society and Nationwide as with most banks, instructions are such that where lack of planning permission indemnity insurance is effected:
- the lack of planning permission indemnity insurance policy must not contain conditions that you are aware would invalidate or prejudice the interests of the bank
- you is obliged to disclose to the insurer all relevant information which you have gathered
- your firm must supply a duplicate of the lack of planning permission indemnity insurance to the borrower and explain to the mortgagor why the lack of planning permission indemnity insurance policy was effected and that a further policy could be necessary if there is further borrowing against the mortgaged property
- the lack of planning permission indemnity insurance policy should always be in favor of the lender and, wherever possible, for the benefit of the borrower and any future owner or mortgage company. Where the borrower will not be protected by the lack of planning permission indemnity insurance policy, the borrower must be advised accordingly.
- the lack of planning permission indemnity insurance policy should be effected at no cost to the lender
- your practice must point out to the borrower that the borrower will need to adhere to any conditions of the lack of planning permission indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the insurance
- your firm are responsible for approving the terms of the lack of planning permission policy on behalf of the mortgage company
- the minimum level of cover for the policy must satisfy the requirements for the lender (See Part II Handbook requirements )
| 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. |
| Adam & Company International | The open market value of the property according to the valuation report. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Birmingham Bank | Please contact Head of Operations to discuss (Gareth Allen) |
| Britannia | Cover to the full value of the property. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Coventry Building Society | Minimum of the value of the property. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| NRAM Ltd | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Platform | 110% of principal sum. |
| Reliance Bank | \xA31,000,000.00 |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| 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. |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
General Lack of Planning Permission indemnity insurance points to consider
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are explained in the policy paperwork. Property lawyers are obliged to direct the borrower to the lack of planning permission indemnity insurance policy paperwork. The intention of lack of planning permission indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to ensure it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the lack of planning permission indemnity insurance policy. It is well worth checking that the time frame is correct.Significant characteristics and benefits of lack of planning permission 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 Planning Permission indemnity insurance Policies should be checked for the following- Cover for compensation incurred in any action regarding the risks specified in the lack of planning permission insurance, including 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 planning permission indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Loss in market value resulting from the successful enforcement of the risks specified in the lack of planning permission 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.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- All sums paid with consent in writing from the insurance company to free the property from the risks specified in the lack of planning permission policy.
Don't forget to check what is excluded from the lack of planning permission policy 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?
Lack of Planning Permission Indemnity Insurance has limitations - Other considerations
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from lack of planning permission insurance may be adequate for your client.The content set out above is in relation to properties in England and Wales.