Mortgage Company conveyancing panel conditions re Local Search Indemnity Insurance
Leeds Building Society and Birmingham Midshires, in common with most banks, dictate their own specific instructions when it comes to local search indemnity insurance. This page sets out to enlighten property law lawyers on the numerous mortgage company conveyancing panel where the title to be charged incorporates local search. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, for example Lloyds TSB, Skipton or Natwest. The information on this page is not focused on local search indemnity insurance requirements.
Need help with local search indemnity insurance from your lender?
RBS and Halifax in common with most banks, requirements are that where local search indemnity insurance is to be put on risk:
- you 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 may be required if there is supplemental lending against the security of the property
- the local search indemnity insurance policy should always be in favor of the mortgage company and, if possible, for the benefit of the mortgagor and any subsequent owner or mortgage company. Where the borrower will not be covered by the local search indemnity insurance policy, you must advise the borrower of this fact.
- the local search indemnity insurance policy should be effected without expense to the bank
- your firm must spell out to the borrower that the borrower will need to comply with any conditions of the local search indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the policy
- the minimum level of cover for the policy must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
- your firm must disclose to the insurer all relevant information which you have gathered
- the local search indemnity insurance policy must not contain conditions which you recognise would invalidate or compromise the interests of the mortgage company
- your practice are responsible for approving the terms of the local search policy on behalf of the mortgage company
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Bradford & Bingley | Amount of loan + 15% |
| Chelsea Building Society | 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. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Cynergy Bank | The market 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 |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Lloyds | The value of the property. |
| Metro Bank | The open market value of the property according to the valuation report. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Pepper Money | An amount equal to at least 110% of the purchase price or value, whichever is higher. 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). |
| 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. |
| Saffron Building Society | Higher of purchase price or valuation. 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). |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| RBS (One Account) | An amount equal to the value of the property. |
| Yorkshire Building Society | 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. |
General Local Search indemnity insurance points to consider
The extent of the terms 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 itself. The intention of local search indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to ensure it is in order. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Local Search Contingency insurance: Important features 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. Local Search indemnity insurance Policies should be checked for the following- Cover for compensation incurred in any proceedings concerning the risks specified in the local search policy, including fees of a legal nature.
- Market value reduction due to the successful enforcement of the risks specified in the local search policy.
- The out of pocket expenses 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.
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the local search policy.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Expenses for works (including professional fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the local search indemnity insurance, to the extent that such costs are rendered abortive by court decision.
You also need to be sure that the answers on the application form are accurate. 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.
Further considerations for local search indemnity insurance
Local Search insurance may satisfy lenders such as Coventry BS or Bank of Scotland 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. Content on this webpage is for general information for Regulated law firms in England and Wales on the the mortgage company 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 covers to properties in England and Wales.