Bank conveyancing panel conditions re Outstanding Leasehold Interest Indemnity Insurance

Accord and Virgin Money, as with most lenders, set their own specific instructions when it comes to outstanding leasehold interest indemnity insurance. The purpose of this page to assist conveyancing solicitors on the numerous bank approved list of panel lawyers where the title to be charged includes outstanding leasehold interest. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, be it Yorkshire Building Society, Santander or Chelsea BS. The information on this page Is not to be read as outstanding leasehold interest indemnity insurance advice.

Need help with outstanding leasehold interest indemnity insurance from your lender?

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Skipton and Birmingham Midshires as with most mortgage companies, instructions are such that where outstanding leasehold interest indemnity insurance is to be put on risk:

• you must send a copy 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 necessary if there is additional borrowing against the mortgaged property
• your practice is duty bound to explain to the mortgagor that the borrower will need to comply with any conditions of the outstanding leasehold interest indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the policy
• the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• the outstanding leasehold interest indemnity insurance policy should not incorporate terms that you know would invalidate or prejudice the interests of the lender
• the outstanding leasehold interest indemnity insurance policy should be effected without expense to the lender
• the outstanding leasehold interest indemnity insurance policy needs to be in favor of the lender and, wherever possible, in favour of the mortgagor and any subsequent registered proprietor or bank. If the borrower will not be covered by the outstanding leasehold interest indemnity insurance policy, the mortgagor should be advised accordingly.
• you is required to disclose to the insurer all relevant information which you have obtained
• your practice are responsible for approving the terms of the outstanding leasehold interest policy on behalf of the mortgage company

As to the level of cover for the outstanding leasehold interest 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 mortgage companies:

Outstanding Leasehold Interest Contingency Insurance : Reflections

The extent of the terms for outstanding leasehold interest indemnity insurance are set out in the policy document. Conveyancing Practitioners should direct your non-lender client to the outstanding leasehold interest indemnity insurance policy itself. Outstanding Leasehold Interest indemnity insurance is designed to afford indemnity in respect of the risks specified in the policy schedule - so you should check the document to ensure it is as it should be. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the outstanding leasehold interest indemnity insurance policy. Again, please check that this is as you expected.

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Important features and benefits of outstanding leasehold interest Contingency insurance :

The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the outstanding leasehold interest indemnity insurance schedule. Outstanding Leasehold Interest indemnity insurance Cover normally includes

• The cost of works (including professional fees) for the purpose of the development commenced, 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 decision.
• Reimbursement for compensation incurred in any proceedings concerning the risks specified in the outstanding leasehold interest policy, as well as solicitors charges.
• 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 sums paid with the written consent of the insurance company to free the property from the risks specified in the outstanding leasehold interest policy.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Diminution in value due to the successful enforcement of the risks specified in the outstanding leasehold interest policy.

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Don't forget to consider what is excluded from the outstanding leasehold interest policy e.g. does the policy cover any property that has been altered within the 12 months prior to the commencement of the policy? Does it cover legal costs?

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Outstanding Leasehold Interest Indemnity Insurance has limitations - Additional considerations

Outstanding Leasehold Interest Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that outstanding leasehold interest indemnity cover will not necessarily be the right solution.

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