Lack of Planning Permission Indemnity Insurance Mortgage Company conveyancing requirements
Bank of Scotland and Accord, in common with many banks, have their own specific instructions when it comes to lack of planning permission indemnity insurance. The content herein aims to help property law solicitors on the different bank conveyancing panel where the title to be charged includes lack of planning permission. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each lender, for example Godiva Mortgages, Skipton or Barclays. The content 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 bank panel you must investigate (including any further investigations to clarify any issues which may arise) to ensure the premises has the correct 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 residence from being utilised as residential property or that the property may be the subject of enforcement action.
Where there is evidence of such a breach or matter but in your professional judgment there is no reasonable chance of enforcement action and, following appropriate enquiries, and you are content that there is a good and marketable title and can provide an unqualified certificate of title, the bank may not insist on Lack of Planning Permission indemnity insurance and you may proceed.
If 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 reveal this to the lender in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each bank such as Bank of Scotland or Accord may take a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Cover is typically needed where there is no proof of compliance with conditions can be provided for works that have existed for for over a year, whether a residential premises or large commercial project. The consequential losses flow from the successful enforcement action by the local authority. In a typical conveyancing scenario the seller 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 ordinarily less expensive than gaining retrospective permission and is certainly significantly quicker. The downside is that the risk of enforcement action still remains.
Lloyds TSB and Barnsley BS as with most mortgage companies, requirements are that where lack of planning permission indemnity insurance is to be put on risk:
- you must disclose to the insurer all relevant information which you have gathered
- your firm are responsible for approving the terms of the lack of planning permission policy on behalf of the bank
- the lack of planning permission indemnity insurance policy should be placed on risk at no expense to the bank
- your firm must provide a duplicate of the lack of planning permission indemnity insurance to the mortgagor and explain to the mortgagor why the lack of planning permission indemnity insurance policy was effected and that additional insurance may be mandatory if there is further lending against the mortgaged property
- you must explain 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 lender of any notice or potential claim in respect of the policy
- the lack of planning permission indemnity insurance policy must be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any future owner or bank. Where the mortgagor will not be covered by the lack of planning permission indemnity insurance policy, you must advise the mortgagor of this fact.
- the level of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the lack of planning permission indemnity insurance policy must not contain conditions which you know would void or compromise the interests of the bank
| 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. |
| 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). |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Clydesdale Bank | Open market value of property. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Generation Home | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Lloyds | The value of the property. |
| Magellan Homeloans | At least equal to the value of the property |
| Metro Bank | The open market value of the property according to the valuation report. |
| 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. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| National Westminster Bank | An amount equal to the value of the property. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
Non lender-specific considerations
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are shown in the policy paperwork. Conveyancing solicitors are obliged to direct your non-lender client to the lack of planning permission indemnity insurance policy itself. Lack of Planning Permission Contingency insurance is devised to provide 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 duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the lack of planning permission indemnity insurance policy. Adequacy in this regard should be checked.Important features 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 Cover normally includes- Diminution in value due to the successful enforcement of the risks specified in the lack of planning permission insurance.
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the lack of planning permission insurance.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Expenses for 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 planning permission policy, to the extent that such costs are rendered abortive by court order.
- Reimbursement for compensation incurred in any action regarding the risks specified in the lack of planning permission insurance, including incurred costs and expenses.
- 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 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 - 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 covers to properties in England and Wales.