Lender conveyancing panel requirements re Outstanding Leasehold Interest Indemnity Insurance
Halifax and Birmingham Midshires, as with many banks, have their own requirements when it comes to outstanding leasehold interest indemnity insurance. This page sets out to enlighten property law firms on the numerous lender solicitors panel where the title for the the property to be mortgaged contains outstanding leasehold interest. It is not a alternative for checking the CML handbook requirements for each lender, be it Lloyds TSB, Yorkshire Building Society or Barnsley BS. 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?
Barclays and Yorkshire Bank Home Loans in common with many mortgage companies, requirements are that where outstanding leasehold interest indemnity insurance is effected:
- you 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 a further policy could be mandatory if there is supplemental lending against the mortgaged property
- the outstanding leasehold interest indemnity insurance policy needs to be in favor of the bank and, if possible, in favour of the mortgagor and any next registered proprietor or lender. If the mortgagor will not be covered by the outstanding leasehold interest indemnity insurance policy, the borrower needs to be advised accordingly.
- the outstanding leasehold interest indemnity insurance policy must not contain conditions that you know would invalidate or prejudice the interests of the mortgage company
- your firm must point out to the borrower that the borrower is obliged to adhere to any conditions of the outstanding leasehold interest indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the insurance
- the outstanding leasehold interest indemnity insurance policy should be effected at no charge to the lender
- you must approve the terms of the outstanding leasehold interest policy on behalf of the bank
- the minimum level of cover for the policy must meet the requirements for the mortgage company (See Part II Handbook requirements )
- your practice is obliged to reveal to the insurer all relevant information which you have gathered
| Lender | Requirement |
|---|---|
| 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. |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Barclays plc | Higher of purchase price or valuation |
| Coutts Finance | The open market value of the property according to the valuation report. |
| First Direct | The value of the insurance must be for at least the full value of the property |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Landmark | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| 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. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| 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). |
| Perenna | The higher of the purchase price or valuation. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| 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 |
| RBS - Direct Line | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
Non lender-specific considerations
The extent of the terms for outstanding leasehold interest indemnity insurance are set out in the policy document. Property lawyers should point your non-lender client to the outstanding leasehold interest indemnity insurance policy itself. The intention of outstanding leasehold interest indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to determine that it is as it should be. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Important features and benefits of outstanding leasehold interest indemnity insurance :
This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Outstanding Leasehold Interest indemnity insurance Cover normally includes- 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.
- All other costs and expenses incurred by the Insured with consent in writing from 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 outstanding leasehold interest indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Reimbursement for compensation incurred in any action regarding the risks specified in the outstanding leasehold interest policy, including fees of a legal nature.
- Market value reduction due to the successful enforcement of the risks specified in the outstanding leasehold interest policy.
- All sums paid with consent in writing from the insurance company to liberate the property from the risks specified in the outstanding leasehold interest insurance.
Don't forget to check what is not included in the outstanding leasehold interest insurance e.g. does the policy cover any property that has been altered within the year prior to the commencement of the policy? Does it cover legal costs?
Outstanding Leasehold Interest Indemnity Insurance has limitations - Other considerations
There may be consequences arising from the enforcement of the risks identified in the outstanding leasehold interest insurance which are not adequately covered by financial compensation. Content 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 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 covers to properties in England and Wales.