Lack of Planning Permission Indemnity Insurance Bank conveyancing requirements
Yorkshire Building Society and Halifax, in common with most mortgage companies, dictate their own specific instructions when it comes to lack of planning permission indemnity insurance. The content herein aims to help property law lawyers on the numerous lender solicitors panel where the title to be charged includes lack of planning permission. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, be it Nationwide, Santander or Virgin Money. 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 conveyancing lawyer on a mortgage company panel you must conduct due diligence as to (including any further enquiries to clarify any issues which may arise) to ensure the property 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 restrict the property from being used as residential 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 opinion there is no reasonable likelihood of enforcement action and, following appropriate enquiries, and you are content that the title is good and marketable and can provide an unqualified COT, the mortgage company may 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 disclose this to the mortgage company in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as Yorkshire Building Society or Halifax will take a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Insurance is typically required where there is no documentary evidence of compliance with conditions can be produced for works that have existed for for over twelve months, whether a residential property or large commercial project. The consequential losses flow from the successful enforcement action 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 purchaser’s name as well as the lender.
A lack of planning permission indemnity insurance policy is ordinarily less expensive than seeking retrospective permission and is without question much quicker. The flipside is that the risk of enforcement action does not disappear.
Natwest and Leeds Building Society in common with most lenders, requirements are that where lack of planning permission indemnity insurance is effected:
- the lack of planning permission indemnity insurance policy should not incorporate conditions that you are aware would invalidate or compromise the interests of the lender
- you must provide a copy 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 might be required if there is further lending against the security of the property
- the lack of planning permission indemnity insurance policy should be placed on risk at no charge to the bank
- the lack of planning permission indemnity insurance policy should always be for the benefit of the bank and, wherever possible, in favour of the mortgagor and any future registered proprietor or mortgage company. If the borrower will not be protected by the lack of planning permission indemnity insurance policy, the borrower should be advised accordingly.
- you must spell out to the borrower that the borrower must 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 relation to the policy
- your practice is required to disclose to the insurer all relevant information which you have obtained
- the level of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- you must approve the terms of the lack of planning permission policy on behalf of the lender
| 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. |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Coventry Building Society | Minimum of the value of the property. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Harpenden Building Society | 110% of mortgage advance |
| ITL Mortgages | Minimum of the value of the property. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| St James Place | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Ulster Bank | An amount equal to the value of the property. |
Non lender-specific considerations
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are explained in the policy paperwork. Property lawyers should point your non-lender client to the lack of planning permission indemnity insurance policy itself. The intention of lack of planning permission indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so you should check the document to determine that it is in order. 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.Significant characteristics and benefits of lack of planning permission Contingency insurance :
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the lack of planning permission indemnity insurance schedule. Lack of Planning Permission indemnity insurance Policies are likely to cover the following- 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.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Diminution in value due to the successful enforcement of the risks specified in the lack of planning permission insurance.
- The cost of works (including professional fees) for the purpose of the development commenced, 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 order.
- Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the lack of planning permission indemnity insurance, as well as fees of a legal nature.
- Money paid with the written consent of the insurance company to free the land from the risks specified in the lack of planning permission insurance.
You also need to be sure that the answers on the application form are correct. However remote the likelihood of a claim on the bank insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being paid out.
Other considerations for lack of planning permission indemnity insurance
Lack of Planning Permission Indemnity insurance isn’t a solution to all of the relevant problems.The above information is in relation to properties in England and Wales.