Bank conveyancing panel requirements re Outstanding Leasehold Interest Indemnity Insurance
Godiva Mortgages and Virgin Money, as with the majority of mortgage companies, set their own requirements when it comes to outstanding leasehold interest indemnity insurance. The content herein aims to help conveyancing firms on the different mortgage company conveyancing 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 lender, whether it be Coventry BS, Chelsea BS or HSBC. 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?
RBS and Skipton like most lenders, requirements are that where outstanding leasehold interest indemnity insurance is to be put on risk:
- your practice must provide a duplicate of the outstanding leasehold interest indemnity insurance to the mortgagor and explain to the mortgagor why the outstanding leasehold interest indemnity insurance policy was effected and that additional insurance may be mandatory if there is additional lending against the security of the property
- you must approve the terms of the outstanding leasehold interest policy on behalf of the mortgage company
- the outstanding leasehold interest indemnity insurance policy must be placed on risk at no expense to the bank
- the outstanding leasehold interest indemnity insurance policy must not contain terms that you are aware would invalidate or prejudice the interests of the lender
- the outstanding leasehold interest indemnity insurance policy needs to be for the benefit of the lender and, if possible, in favour of the mortgagor and any future registered proprietor 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.
- the level of indemnity must meet the requirements for the lender (See Part II Handbook requirements )
- your firm is duty bound to explain to the mortgagor that the borrower will need to adhere to any conditions of the outstanding leasehold interest indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the policy
- your firm is required to disclose to the insurer all relevant information which you have acquired
| Lender | Requirement |
|---|---|
| Bluestone Mortgages | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Coventry Building Society | Minimum of the value of the property. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| 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 TSB Scotland | The value of the property |
| Metro Bank | The open market value of the property according to the valuation report. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Paratus | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Reliance Bank | \xA31,000,000.00 |
| Saffron Building Society | Higher of purchase price or valuation. 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). |
| 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). |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| RBS - Direct Line | 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. |
Non lender-specific considerations
The extent of the terms for outstanding leasehold interest indemnity insurance are identified in the policy document. Conveyancing solicitors should point the borrower to the outstanding leasehold interest indemnity insurance policy paperwork. Outstanding Leasehold Interest indemnity insurance is devised 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 in order. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Important features 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 should be checked for the following- Loss in market value resulting from the successful enforcement of the risks specified in the outstanding leasehold interest insurance.
- The cost 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.
- Reimbursement for compensation incurred in any action concerning the risks specified in the outstanding leasehold interest policy, including incurred costs and expenses.
- All other costs and expenses incurred by the Insured with consent in writing from 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 indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Money paid with consent in writing from the insurance company to liberate the property from the risks specified in the outstanding leasehold interest indemnity insurance.
Don't forget to consider what is not included in the outstanding leasehold interest insurance e.g. does the policy cover any residence that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?
Further considerations for outstanding leasehold interest indemnity insurance
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 answer. Content on this webpage is for general information for Regulated law firms in England and Wales on the the mortgage company solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the mortgage company 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.