Lender conveyancing panel conditions re Outstanding Leasehold Interest Indemnity Insurance
Bank of Scotland and Yorkshire Building Society, as with most lenders, dictate their own requirements when it comes to outstanding leasehold interest indemnity insurance. The content herein aims to help conveyancing firms on the various mortgage company solicitors panel where the title for the the property to be mortgaged incorporates outstanding leasehold interest. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, for example Halifax, Godiva Mortgages or Barnsley BS. The content on this page is not focused on outstanding leasehold interest indemnity insurance requirements.
Need help with outstanding leasehold interest indemnity insurance from your lender?
Santander and Coventry BS in common with most mortgage companies, obligations require that where outstanding leasehold interest indemnity insurance is to be put on risk:
- your firm are responsible for approving the terms of the outstanding leasehold interest policy on behalf of the bank
- the outstanding leasehold interest indemnity insurance policy should not contain conditions which you know would invalidate or prejudice the interests of the mortgage company
- the outstanding leasehold interest indemnity insurance policy needs to be for the benefit of the bank and, if possible, for the benefit of the borrower and any next registered proprietor or mortgage company. If the borrower will not be covered by the outstanding leasehold interest indemnity insurance policy, the mortgagor needs to be informed accordingly.
- the level of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- you is duty bound to spell out to the borrower that the borrower must 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 policy
- your firm is required to disclose to the insurer all relevant information which you have obtained
- the outstanding leasehold interest indemnity insurance policy should be placed on risk without cost to the lender
- you must send a duplicate of the outstanding leasehold interest indemnity insurance to the borrower and explain to the mortgagor why the outstanding leasehold interest indemnity insurance policy was effected and that additional insurance may be required if there is additional borrowing against the mortgaged property
| 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. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Clydesdale Bank | Open market value of property. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Holmesdale Building Society | 110% |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| 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. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| RBS - Virgin One | 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. |
| 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. |
Outstanding Leasehold Interest Contingency Insurance : Reflections
The extent of the terms for outstanding leasehold interest indemnity insurance are identified in the policy document. Conveyancing Practitioners 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 afford indemnity in respect of the risks specified in the policy schedule - so it’s important to check the document to determine that it is in order. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the outstanding leasehold interest indemnity insurance policy. Again, please check that this is as you expected.Outstanding Leasehold Interest 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. Outstanding Leasehold Interest indemnity insurance Policies should be checked for the following- Loss in market value resulting from the successful enforcement of the risks specified in the outstanding leasehold interest policy.
- Reimbursement for compensation incurred in any action regarding the risks specified in the outstanding leasehold interest policy, including solicitors charges.
- 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.
- Money paid with the written consent of the insurance company to free the land from the risks specified in the outstanding leasehold interest indemnity insurance.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- The cost of 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 insurance, to the extent that such costs are rendered abortive by court order.
Due diligence should extend to checking that the answers on the application form are accurate. However remote the likelihood of a claim on the bank insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being met.
Outstanding Leasehold Interest Indemnity Insurance has limitations - Other 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 contained within this webpage is for general information for Regulated law firms in England and Wales on the the lender 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 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.