Indemnity Insurance of Lack of Planning Permission Lender conveyancing obligations
HSBC and Barnsley BS, in common with many mortgage companies, have their own specific instructions when it comes to lack of planning permission indemnity insurance. This page sets out to enlighten conveyancing firms on the different mortgage company solicitors panel where the title to be charged includes lack of planning permission. Solicitors should still check the CML handbook requirements for each lender, whether it be Coventry BS, Skipton or Santander. The information 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?
As a conveyancing lawyer on a mortgage company panel you must conduct due diligence as to (including any further queries to clarify any issues which may arise) to ensure the residence has the benefit of any necessary planning consents (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 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 opinion there is no reasonable chance of enforcement action and, following appropriate enquiries, and you are satisfied that the title is good and marketable and are able to issue an unqualified certificate of title, the mortgage company will not require Lack of Planning Permission indemnity insurance and you may go ahead without it.
If 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 notify this to the lender in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as HSBC or Barnsley BS may take a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Insurance is typically needed where there is no proof of compliance with conditions can be produced for works that have existed for 12 months 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 ordinarily cheaper than obtaining retrospective approval and is without question much quicker. The flipside is that the risk of enforcement action still remains.
Leeds Building Society and Yorkshire Building Society as with most mortgage companies, instructions are such that where lack of planning permission indemnity insurance is to be put on risk:
- the lack of planning permission indemnity insurance policy must be for the benefit of the lender and, wherever possible, for the benefit of the borrower and any subsequent owner or lender. Where the borrower will not be protected by the lack of planning permission indemnity insurance policy, the borrower must be advised accordingly.
- your practice must spell out to the mortgagor that the borrower will need to adhere to any conditions of the lack of planning permission indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the policy
- the lack of planning permission indemnity insurance policy should be placed on risk without expense to the bank
- your practice are responsible for approving the terms of the lack of planning permission policy on behalf of the lender
- your firm is obliged to disclose to the insurer all relevant information which you have gathered
- you must send a duplicate of the lack of planning permission indemnity insurance to the borrower and explain to the borrower why the lack of planning permission indemnity insurance policy was effected and that additional insurance might be mandatory if there is additional lending against the mortgaged property
- the minimum level of cover for the policy must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the lack of planning permission indemnity insurance policy must not contain terms that you recognise would invalidate or prejudice the interests of the mortgage company
| Lender | Requirement |
|---|---|
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Barclays plc | Higher of purchase price or valuation |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Habito | Higher of purchase price or valuation |
| Holmesdale Building Society | 110% |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| Landmark | 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. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Mortgage Express | Amount of loan + 15% |
| National Westminster Bank | An amount equal to the value of the property. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| RBS - Virgin One | An amount equal to the value of the property. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
| Yorkshire Bank | Open market value of property. |
Lack of Planning Permission Contingency Insurance : Reflections
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 document. Lack of Planning Permission Contingency insurance is designed to afford indemnity in respect of the risks specified in the policy schedule - so you should check the document to ensure it is in order. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Lack of Planning Permission indemnity insurance: Important aspects and benefits:
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 Cover normally includes- 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.
- Reimbursement for compensation incurred in any proceedings concerning the risks specified in the lack of planning permission insurance, including fees of a legal nature.
- The cost of works (including architects’ and surveyors’ 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 indemnity insurance, to the extent that such costs are rendered abortive by court order.
- All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the lack of planning permission insurance.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- Diminution in value due to the successful enforcement of the risks specified in the lack of planning permission insurance.
Due diligence should extend to checking that the answers on the application form are correct. However remote the likelihood of a claim on the lender insurance policy might be you can be sure that the insurer will check the details on any proposal form very carefully prior to any claim being met.
Lack of Planning Permission Indemnity Insurance has limitations - Supplemental considerations
Lack of Planning Permission insurance may satisfy lenders such as Lloyds TSB or Natwest and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.The content set out above is in relation to properties in England and Wales.