Lender conveyancing panel requirements re Outstanding Leasehold Interest Indemnity Insurance
Yorkshire Bank Home Loans and Chelsea BS, like most banks, have their own requirements when it comes to outstanding leasehold interest indemnity insurance. This page is designed to help property law lawyers on the different bank solicitors panel where the title to be charged contains outstanding leasehold interest. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Yorkshire Building Society, Halifax or Santander. The information on this page is not focused on outstanding leasehold interest indemnity insurance requirements.
Need help with outstanding leasehold interest indemnity insurance from your lender?
Skipton and Leeds Building Society as with most banks, obligations require that where outstanding leasehold interest indemnity insurance is effected:
- your practice are responsible for approving the terms of the outstanding leasehold interest policy on behalf of the lender
- the outstanding leasehold interest indemnity insurance policy needs to be in favor of the lender and, wherever possible, for the benefit of the borrower and any future owner or mortgage company. If the mortgagor will not be covered by the outstanding leasehold interest indemnity insurance policy, you must advise the borrower of this fact.
- your firm is obliged to disclose to the insurer all relevant information which you have acquired
- your practice must send a copy of the outstanding leasehold interest indemnity insurance to the mortgagor and explain to the borrower why the outstanding leasehold interest indemnity insurance policy was effected and that additional insurance might be mandatory if there is additional lending against the security of the property
- the minimum level of cover for the policy must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the outstanding leasehold interest indemnity insurance policy should not contain terms that you know would void or prejudice the interests of the mortgage company
- the outstanding leasehold interest indemnity insurance policy must be placed on risk without charge to the lender
- your firm is duty bound to spell out to the mortgagor that the borrower is obliged to comply with any conditions of the outstanding leasehold interest indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the policy
| Lender | Requirement |
|---|---|
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market 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. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Habito | Higher of purchase price or valuation |
| Halifax | An amount at least equal to the mortgage advance. |
| Hampden | The open market value of the property according to the valuation report. |
| Investec | The open market value of the property according to the valuation report. |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Legal & General Home Finance | The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns. |
| Lloyds | The value of the property. |
| Lloyds | The value of the property. |
| Lloyds TSB Scotland | The value of the property |
| Metro Bank | The open market value of the property according to the valuation report. |
| Molo Finance 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 mortgages. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| 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). |
| TSB | The value of the property |
General Outstanding Leasehold Interest indemnity insurance points to consider
The extent of the terms for outstanding leasehold interest indemnity insurance are shown in the policy document. Conveyancing Practitioners should point the borrower to the outstanding leasehold interest indemnity insurance policy paperwork. Outstanding Leasehold Interest Contingency insurance is devised to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to determine that it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the outstanding leasehold interest indemnity insurance policy. Adequacy in this regard should be checked.Important aspects and benefits of outstanding leasehold interest 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. Outstanding Leasehold Interest indemnity insurance Policies are likely to cover the following- Diminution in value due to the successful enforcement of the risks specified in the outstanding leasehold interest insurance.
- Money paid with consent in writing from the insurance company to liberate the property from the risks specified in the outstanding leasehold interest insurance.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the outstanding leasehold interest policy, to the extent that such costs are rendered abortive by court decision.
- The out of pocket expenses of altering or taking down 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.
- Cover for compensation incurred in any action regarding the risks specified in the outstanding leasehold interest policy, including fees of a legal nature.
Always consider what is excluded from the outstanding leasehold interest insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the commencement of the policy? Does it cover legal costs?
Outstanding Leasehold Interest Indemnity Insurance has limitations - Supplemental considerations
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from outstanding leasehold interest insurance may be adequate for your client. Information provided on this webpage is for general information for Regulated law firms in England and Wales on the the mortgage company approved panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the bank 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 outstanding leasehold interest 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.