Indemnity Insurance of Lost Documents Mortgage Company conveyancing requirements

Godiva Mortgages and Birmingham Midshires, like the majority of banks, dictate their own requirements when it comes to lost documents indemnity insurance. The purpose of this page to assist residential conveyancing firms on the various bank solicitors panel where the title for the the property to be mortgaged incorporates lost documents. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, whether it be Barnsley BS, Accord or Bank of Scotland. The content on this page is not focused on lost documents indemnity insurance requirements.

Need help with lost documents indemnity insurance from your lender?

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Coventry BS and Santander as with many banks, obligations require that where lost documents indemnity insurance is to be taken out:

• your practice is duty bound to explain to the mortgagor that the borrower must adhere to any conditions of the lost documents indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
• the lost documents indemnity insurance policy should not incorporate terms that you recognise would invalidate or prejudice the interests of the lender
• the lost documents indemnity insurance policy must be effected without expense to the bank
• your firm must reveal to the insurer all relevant information which you have acquired
• the level of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
• your firm must provide a duplicate of the lost documents indemnity insurance to the mortgagor and explain to the mortgagor why the lost documents indemnity insurance policy was effected and that a further policy could be mandatory if there is supplemental lending against the security of the property
• your practice must approve the terms of the lost documents policy on behalf of the mortgage company
• the lost documents indemnity insurance policy needs to be for the benefit of the lender and, if possible, in favour of the mortgagor and any next owner or mortgage company. If the borrower will not be covered by the lost documents indemnity insurance policy, the mortgagor must be advised accordingly.

As to the level of cover for the lost documents indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the CML handbook PII requirements for lenders:

Non lender-specific considerations

The full terms, conditions and exclusions for lost documents indemnity insurance are explained in the policy document. Property lawyers should point your non-lender client to the lost documents indemnity insurance policy itself. The intention of lost documents indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check the schedule to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.

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Lost Documents 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 lost documents indemnity insurance schedule. Lost Documents indemnity insurance Cover normally includes

• Cover for compensation incurred in any action concerning the risks specified in the lost documents policy, including legal and associated costs.
• 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.
• All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
• 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 lost documents indemnity insurance, to the extent that such costs are rendered abortive by court order.
• Loss in market value resulting from the successful enforcement of the risks specified in the lost documents indemnity insurance.
• All sums paid with the written consent of the insurance company to free the land from the risks specified in the lost documents indemnity insurance.

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As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the lost documents policy will not be valid.

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Lost Documents Indemnity Insurance has limitations - Additional considerations

Lost Documents insurance may satisfy lenders such as Virgin Money or Barclays 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.

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The content set out above is in relation to properties in England and Wales.