Mortgage Company conveyancing panel conditions re Lack of Planning Permission Indemnity Insurance
RBS and Skipton, as with many mortgage companies, dictate their own requirements when it comes to lack of planning permission indemnity insurance. This page is designed to help conveyancing firms on the different bank conveyancing panel where the title to be charged incorporates lack of planning permission. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be Halifax, Barclays or Barnsley BS. The information on this page is not focused on lack of planning permission indemnity insurance requirements.
Need help with lack of planning permission indemnity insurance from your lender?
As a property lawyer on a lender panel you must make appropriate searches and enquiries take all reasonable steps (including any supplemental enquiries to clarify any issues which may arise) to ensure the residence 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 evidence of any breach of the conditions of that or any other consent or certificate affecting the property; and that no matter is revealed which would prohibit the premises from being utilised as domestic property or that the property may be the subject of enforcement action.
If there is evidence of a breach of planning permission but in your professional judgment there is no reasonable chance 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 may not require 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 COT, you should report this to the bank in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each lender such as RBS or Skipton will take a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Cover is typically required where there is no proof of compliance with conditions can be provided for works that have existed for a year or more, 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 vendor would be expected to pay the premium for the Lack of Planning Permission Indemnity Insurance, which would be taken out in the buyer’s name as well as the bank.
A lack of planning permission indemnity insurance policy is usually more cost effective than seeking retrospective permission and is undoubtedly much quicker. The downside is that the risk of enforcement action still remains.
Yorkshire Bank Home Loans and Coventry BS in common with the majority of banks, requirements are that where lack of planning permission indemnity insurance is to be put on risk:
- you must send a copy of the lack of planning permission indemnity insurance to the mortgagor and explain to the borrower why the lack of planning permission indemnity insurance policy was effected and that additional insurance may be necessary if there is supplemental borrowing against the mortgaged property
- your practice must approve the terms of the lack of planning permission policy on behalf of the mortgage company
- the lack of planning permission indemnity insurance policy must be placed on risk without charge to the mortgage company
- your firm must point out to the mortgagor that the borrower must adhere to any conditions of the lack of planning permission indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the insurance
- the lack of planning permission indemnity insurance policy should not incorporate conditions which you are aware would void or prejudice the interests of the mortgage company
- the level of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- your firm is obliged to disclose to the insurer all relevant information which you have gathered
- the lack of planning permission indemnity insurance policy needs to be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any subsequent owner or lender. Where the mortgagor will not be protected by the lack of planning permission indemnity insurance policy, you must advise the mortgagor of this fact.
| Lender | Requirement |
|---|---|
| Accord 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 mortgagee. |
| 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. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Aviva Equity Release | Full value of the property. |
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Barnsley 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. |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Bradford & Bingley | Amount of loan + 15% |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Habito | Higher of purchase price or valuation |
| Hodge Equity Release | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| 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. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| Scottish Widows | The value of the property. |
| 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). |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| 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. |
Non lender-specific considerations
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are identified in the policy paperwork. Conveyancing solicitors are obliged to direct your non-lender client to the lack of planning permission indemnity insurance policy paperwork. Lack of Planning Permission indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the document to ensure it is correct. The lifetime 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 planning permission indemnity insurance :
This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Lack of Planning Permission indemnity insurance Policies should be checked for the following- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- Cover for compensation incurred in any action regarding the risks specified in the lack of planning permission policy, as well as incurred costs and expenses.
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the lack of planning permission policy.
- Expenses for 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 planning permission insurance, to the extent that such costs are rendered abortive by court decision.
- 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.
- Diminution in value due to the successful enforcement of the risks specified in the lack of planning permission indemnity insurance.
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the lack of planning permission policy will be invalidated.
Lack of Planning Permission Indemnity Insurance has limitations - Supplemental 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 above information is in relation to properties in England and Wales.