Indemnity Insurance of Local Search Lender conveyancing obligations
Halifax and Leeds Building Society, as with the majority of banks, dictate their own requirements when it comes to local search indemnity insurance. This page is designed to help residential conveyancing practitioners on the various bank conveyancing panel where the title to be charged includes local search. Lawyers are advised to familiarise themselves with the CML handbook requirements for each mortgage company, for example Barnsley BS, Natwest or Chelsea BS. The content on this page Is not to be read as local search indemnity insurance advice.
Need help with local search indemnity insurance from your lender?
Lloyds TSB and Santander like many banks, requirements are that where local search indemnity insurance is effected:
- your practice is obliged to reveal to the insurer all relevant information which you have gathered
- your practice must spell out to the mortgagor that the borrower must comply with any conditions of the local search indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in relation to the policy
- the local search indemnity insurance policy should always be in favor of the lender and, wherever possible, for the benefit of the mortgagor and any subsequent registered proprietor or mortgage company. If the mortgagor will not be protected by the local search indemnity insurance policy, the mortgagor should be advised accordingly.
- the level of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- the local search indemnity insurance policy must not contain terms which you recognise would void or prejudice the interests of the mortgage company
- your firm must supply a copy of the local search indemnity insurance to the borrower and explain to the borrower why the local search indemnity insurance policy was effected and that a further policy might be required if there is supplemental lending against the mortgaged property
- your practice must approve the terms of the local search policy on behalf of the bank
- the local search indemnity insurance policy should be placed on risk at no cost to the mortgage company
| 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. |
| 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% |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| 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. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Cynergy Bank | The market value of the property. |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Masthaven Bank | 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. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| 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. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
Non lender-specific considerations
The full terms, conditions and exclusions for local search indemnity insurance are shown in the policy document. Conveyancing Practitioners are obliged to point your non-lender client to the local search indemnity insurance policy paperwork. Local Search indemnity insurance is designed to grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check the document to ensure it is in order. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Significant aspects and benefits of local search indemnity insurance :
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the local search indemnity insurance schedule. Local Search indemnity insurance Cover normally includes- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- 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.
- Market value reduction due to the successful enforcement of the risks specified in the local search policy.
- All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the local search insurance.
- The cost of 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 local search policy, to the extent that such costs are rendered abortive by court decision.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the local search policy, including legal and associated costs.
Always consider what is not included in the local search insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?
Local Search Indemnity Insurance has limitations - Further considerations
Local Search Indemnity insurance isn’t a solution to all of the relevant problems. Information provided on this webpage is for general information for Regulated law firms in England and Wales on the the bank conveyancing 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 above information is in relation to properties in England and Wales.