Contingent Buildings Indemnity Insurance Mortgage Company conveyancing requirements
Santander and Halifax, as with the majority of lenders, set their own specific instructions when it comes to contingent buildings indemnity insurance. This page sets out to enlighten property law solicitors on the different mortgage company conveyancing panel where the title to be charged contains contingent buildings. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Yorkshire Bank Home Loans, Accord or Nationwide. The content on this page is not focused on contingent buildings indemnity insurance requirements.
Need help with contingent buildings indemnity insurance from your lender?
Birmingham Midshires and Barclays like most banks, instructions are such that where contingent buildings indemnity insurance is effected:
- the contingent buildings indemnity insurance policy should not incorporate conditions which you recognise would invalidate or prejudice the interests of the bank
- you must send a duplicate of the contingent buildings indemnity insurance to the mortgagor and explain to the borrower why the contingent buildings indemnity insurance policy was effected and that a further policy could be necessary if there is supplemental lending against the security of the property
- you is duty bound to spell out to the borrower that the borrower is obliged to comply with any conditions of the contingent buildings indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in relation to the policy
- the level of indemnity must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your firm must approve the terms of the contingent buildings policy on behalf of the bank
- you must disclose to the insurer all relevant information which you have obtained
- the contingent buildings indemnity insurance policy must be placed on risk without expense to the mortgage company
- the contingent buildings indemnity insurance policy needs to be for the benefit of the lender and, if possible, in favour of the mortgagor and any future owner or mortgagee. Where the mortgagor will not be covered by the contingent buildings indemnity insurance policy, you must advise the borrower of this fact.
| Lender | Requirement |
|---|---|
| Accord Mortgages | 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. |
| Adam & Company | The open market value of the property according to the valuation report. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Birmingham Bank | Please contact Head of Operations to discuss (Jackie Burchill) |
| 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. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Godiva Mortgages | Minimum of the value of the property. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| 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. |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| 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). |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| RBS- First Active | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| 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. |
General Contingent Buildings indemnity insurance points to consider
The extent of the terms for contingent buildings indemnity insurance are shown in the policy paperwork. Conveyancing solicitors are obliged to point your non-lender client to the contingent buildings indemnity insurance policy itself. The intention of contingent buildings indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to ensure it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the contingent buildings indemnity insurance policy. Adequacy in this regard should be checked.Important features and benefits of contingent buildings indemnity insurance :
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the contingent buildings indemnity insurance schedule. Contingent Buildings indemnity insurance Policies should be checked for the following- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- 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 contingent buildings indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Reimbursement for compensation incurred in any action concerning the risks specified in the contingent buildings policy, as well as incurred costs and expenses.
- All sums paid with consent in writing from the insurance company to liberate the property from the risks specified in the contingent buildings insurance.
- Loss in market value resulting from the successful enforcement of the risks specified in the contingent buildings policy.
- 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.
You also need to be sure that the answers on the application form are accurate. Regardless of how remote a claim on the mortgage company insurance policy might be you can certain that the insurer will check the details on any proposal form very carefully prior to any claim being paid out.
Contingent Buildings Indemnity Insurance has limitations - Additional considerations
Contingent Buildings insurance may satisfy lenders such as Bank of Scotland or Natwest and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner. Content on this webpage is for general information for Regulated law firms in England and Wales on the the lender conveyancing 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 contingent buildings Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The content set out above is in relation to properties in England and Wales.