Indemnity Insurance of Local Search Mortgage Company conveyancing requirements
Lloyds TSB and Birmingham Midshires, as with most lenders, set their own requirements when it comes to local search indemnity insurance. This page sets out to enlighten residential conveyancing solicitors on the various mortgage company approved list of panel lawyers where the title for the the property to be mortgaged incorporates local search. Lawyers are advised to familiarise themselves with the CML handbook requirements for each mortgage company, whether it be Barclays, Nationwide or RBS. The information on this page is not focused on local search indemnity insurance requirements.
Need help with local search indemnity insurance from your lender?
Chelsea BS and Coventry BS in common with most banks, instructions are such that where local search indemnity insurance is to be taken out:
- you are responsible for approving the terms of the local search policy on behalf of the bank
- you is required to reveal to the insurer all relevant information which you have acquired
- your practice must supply a duplicate of the local search indemnity insurance to the mortgagor and explain to the borrower why the local search indemnity insurance policy was effected and that additional insurance might be necessary if there is supplemental lending against the mortgaged property
- the local search indemnity insurance policy should not contain terms which you recognise would void or compromise the interests of the bank
- the local search indemnity insurance policy must be effected at no cost to the mortgage company
- your practice must spell out to the mortgagor that the borrower will need to comply with any conditions of the local search indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in respect of the policy
- the local search indemnity insurance policy needs to be in favor of the mortgage company and, wherever possible, for the benefit of the mortgagor and any subsequent owner or mortgagee. Where the borrower will not be covered by the local search indemnity insurance policy, you must advise the mortgagor of this fact.
- the level of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Barclays plc | Higher of purchase price or valuation |
| Bluestone Mortgages | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Britannia | Cover to the full value of the property. |
| Clydesdale Bank | Open market value of property. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| 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 |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| Leeds Building Society | An amount at least equal to the amount of the mortgage advance plus 10%. Any indemnity insurance policy must protect the borrowers, any successor in title and any Mortgagee. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| Lloyds | The value of the property. |
| Platform | 110% of principal sum. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| Scottish Widows | The value of the property. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
Local Search Contingency Insurance : Reflections
The extent of the terms for local search indemnity insurance are set out in the policy paperwork. Conveyancing solicitors should direct your non-lender client to the local search indemnity insurance policy paperwork. The intention of local search indemnity insurance is to provide indemnity in respect of the risks set out in the policy schedule - so you should check the document to ensure it is correct. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the local search indemnity insurance policy. Adequacy in this regard should be checked.Significant characteristics and benefits of local search indemnity insurance :
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. Local Search indemnity insurance Policies should be checked for the following- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Cover for compensation incurred in any proceedings in respect of the risks specified in the local search policy, as well as incurred costs and expenses.
- Market value reduction due to the successful enforcement of the risks specified in the local search insurance.
- The cost of works (including professional fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the local search insurance, to the extent that such costs are rendered abortive by court order.
- Money paid with consent in writing from the insurance company to liberate the property from the risks specified in the local search policy.
- The cost of altering or demolishing 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.
You also need to be sure that the answers on the application form are accurate. Regardless of how remote a claim on the mortgage company insurance policy might be you can be sure that the insurer will check the details on any proposal form very carefully before any claim is admitted.
Local Search Indemnity Insurance has limitations - Further considerations
Local Search Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that local search indemnity cover will not necessarily be the answer. Information contained within this webpage is for general information for Regulated law firms in England and Wales on the the lender solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most local search Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The content set out above is in relation to properties in England and Wales.