Contingent Buildings Indemnity Insurance Lender conveyancing requirements

Natwest and Leeds Building Society, as with many banks, dictate their own specific instructions when it comes to contingent buildings indemnity insurance. This page is designed to help property law firms on the numerous lender approved list of panel lawyers where the title for the the property to be mortgaged includes contingent buildings. It is not a substitute for checking the CML handbook requirements for each bank, whether it be Lloyds TSB, Birmingham Midshires or Yorkshire Bank Home Loans. The content on this page is not focused on contingent buildings indemnity insurance requirements.

Need help with contingent buildings indemnity insurance from your lender?

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Yorkshire Building Society and Barclays in common with the majority of mortgage companies, requirements are that where contingent buildings indemnity insurance is effected:

• your firm is required to reveal to the insurer all relevant information which you have gathered
• your firm is duty bound to point out to the mortgagor that the borrower is obliged to comply with any conditions of the contingent buildings indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in relation to the insurance
• the contingent buildings indemnity insurance policy must be placed on risk at no cost to the mortgage company
• your firm are responsible for approving the terms of the contingent buildings policy on behalf of the lender
• the level of indemnity must satisfy the requirements for the lender (See Part II Handbook requirements )
• the contingent buildings indemnity insurance policy needs to be in favor of the bank and, wherever possible, in favour of the mortgagor and any subsequent registered proprietor or mortgagee. If the mortgagor will not be protected by the contingent buildings indemnity insurance policy, you must advise the mortgagor of this fact.
• you must provide a copy of the contingent buildings indemnity insurance to the borrower and explain to the mortgagor why the contingent buildings indemnity insurance policy was effected and that additional insurance might be mandatory if there is additional borrowing against the security of the property
• the contingent buildings indemnity insurance policy must not incorporate terms that you recognise would void or compromise the interests of the lender

As to the level of cover for the contingent buildings indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for mortgage companies:

Contingent Buildings Contingency Insurance : Reflections

The full terms, conditions and exclusions for contingent buildings indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners should point your non-lender client to the contingent buildings indemnity insurance policy paperwork. The intention of contingent buildings indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check any draft to determine that it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the contingent buildings indemnity insurance policy. Again, please check that this is as you expected.

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Important characteristics and benefits of contingent buildings 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. Contingent Buildings indemnity insurance Policies should be checked for the following

• Diminution in value due to the successful enforcement of the risks specified in the contingent buildings insurance.
• 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.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the contingent buildings insurance, to the extent that such costs are rendered abortive by court order.
• Cover for compensation incurred in any proceedings in respect of the risks specified in the contingent buildings insurance, including incurred costs and expenses.
• Money paid with the written consent of the insurance company to free the property from the risks specified in the contingent buildings insurance.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer

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As with any insurance policy, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the contingent buildings policy will not be valid.

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Supplemental considerations for contingent buildings indemnity insurance

Contingent Buildings insurance may satisfy lenders such as Coventry BS or HSBC 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.

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WhenIBought

Was contingent buildings insurance arranged because your lease left uncertainty over who must insure or reinstate the building? If that issue has resurfaced on a sale or remortgage, revisit what you were told when you bought. WhenIBought's defective lease page looks at problems with lease provisions, including insurance obligations, and offers a way to tell us what happened.

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