Mortgage Company conveyancing panel requirements re Lack of Planning Permission Indemnity Insurance
RBS and Barnsley BS, like the majority of banks, dictate their own requirements when it comes to lack of planning permission indemnity insurance. The purpose of this page to assist domestic conveyancing solicitors on the numerous mortgage company approved list of panel lawyers where the title to be charged includes lack of planning permission. Solicitors should still check the CML handbook requirements for each bank, for example Bank of Scotland, Barclays or Yorkshire Bank Home Loans. 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?
Being a conveyancing lawyer on a mortgage company panel you must conduct due diligence as to (including any supplemental investigations to clarify any issues which may arise) to ensure the residence has the appropriate planning consents (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 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 prospect of enforcement action and, following reasonable enquiries, and you are content that there is a good and marketable title and are able to issue an unqualified COT, 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 unqualified certificate of title, you should disclose this to the lender in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as RBS or Barnsley BS may adopt a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Indemnity Insurance is typically required where there is no proof of compliance with conditions can be produced for works that have been in existence for for over a year, whether a residential residence or large commercial project. The loss arises following successful enforcement action by the local authority. In a typical conveyancing scenario the seller would be expected to cover the costs of 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 normally less expensive than seeking retrospective consent and is undoubtedly much quicker. The downside is that the risk of enforcement action still remains.
Birmingham Midshires and Virgin Money in common with many lenders, instructions are such that where lack of planning permission indemnity insurance is to be put on risk:
- 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 should be placed on risk at no charge to the lender
- the lack of planning permission indemnity insurance policy should always be for the benefit of the mortgage company and, if possible, in favour of the mortgagor and any future owner or lender. Where the borrower will not be covered by the lack of planning permission indemnity insurance policy, you must advise the mortgagor of this fact.
- your firm must explain to the borrower that the borrower is obliged 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
- you is required to disclose to the insurer all relevant information which you have gathered
- the lack of planning permission indemnity insurance policy should not incorporate conditions which you know would invalidate or prejudice the interests of the lender
- your firm must provide 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 may be required if there is additional borrowing against the security of the property
- you are responsible for approving the terms of the lack of planning permission policy on behalf of the mortgage company
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Bradford & Bingley | Amount of loan + 15% |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| First Direct | The value of the insurance must be for at least the full value of the property |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Reliance Bank | \xA31,000,000.00 |
| 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). |
| Tandem Bank | An amount at least equal to 110% of the purchase price or valuation – whichever is the greater. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| RBS - Direct Line | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| Whistletree | 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 document. Conveyancing solicitors are obliged to point the borrower 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 you should check any draft to ensure it is correct. The continuance 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.Lack of Planning Permission indemnity insurance: Significant features and benefits:
The policy 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 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 action concerning the risks specified in the lack of planning permission indemnity insurance, including solicitors charges.
- Market value reduction resulting from the successful enforcement of the risks specified in the lack of planning permission policy.
- 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.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- The cost of 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 policy, to the extent that such costs are rendered abortive by court decision.
Always consider what is excluded from the lack of planning permission policy e.g. does the policy cover any property that has been altered within the year prior to the commencement of the policy? Does it cover legal costs?
Additional considerations for lack of planning permission indemnity insurance
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.