Indemnity Insurance of Contingent Buildings Mortgage Company conveyancing requirements
Skipton and RBS, in common with most lenders, set their own requirements when it comes to contingent buildings indemnity insurance. This page is designed to help residential conveyancing practitioners on the various lender solicitors panel where the title for the the property to be mortgaged contains contingent buildings. Lawyers are advised to familiarise themselves with the CML handbook requirements for each mortgage company, for example Santander, Lloyds TSB or Chelsea BS. The content on this page Is not to be read as contingent buildings indemnity insurance advice.
Need help with contingent buildings indemnity insurance from your lender?
Virgin Money and Barnsley BS like most mortgage companies, requirements are that where contingent buildings indemnity insurance is to be taken out:
- the contingent buildings indemnity insurance policy must be in favor of the lender and, wherever possible, in favour of the borrower and any subsequent owner or lender. If the mortgagor will not be covered by the contingent buildings indemnity insurance policy, you must advise the mortgagor of this fact.
- you is duty bound to spell out to the borrower that the borrower is obliged to adhere to any conditions of the contingent buildings indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the policy
- you must send a copy 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 additional insurance might be necessary if there is further lending against the security of the property
- the contingent buildings indemnity insurance policy must be placed on risk at no charge to the lender
- the contingent buildings indemnity insurance policy must not contain conditions that you are aware would invalidate or compromise the interests of the mortgage company
- your firm are responsible for approving the terms of the contingent buildings policy on behalf of the bank
- you is obliged to reveal to the insurer all relevant information which you have gathered
- the limit of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
| 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. |
| Aviva Equity Release | Full value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Barclays plc | Higher of purchase price or valuation |
| Dudley Building Society | Purchase price or valuation, whichever is higher. |
| Habito | Higher of purchase price or valuation |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| 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 |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Platform | 110% of principal sum. |
| St James Place | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| TSB | The value of the property |
| Royal Bank of Scotland | 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. |
Contingent Buildings Contingency Insurance : Reflections
The extent of the terms for contingent buildings indemnity insurance are identified in the policy paperwork. Conveyancing solicitors should direct the borrower to the contingent buildings indemnity insurance policy paperwork. Contingent Buildings Contingency insurance is devised to afford indemnity in respect of the risks specified in the policy schedule - so you should check the schedule to determine that it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.Important features and benefits of contingent buildings indemnity insurance :
The insurance 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 are likely to cover the following- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- Loss in market 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.
- Liability for damages or compensation incurred in any action in respect of the risks specified in the contingent buildings indemnity insurance, including fees of a legal nature.
- Money paid with the written consent of the insurance company to free the land from the risks specified in the contingent buildings indemnity insurance.
- Expenses for works (including professional fees) for the purpose of the development started, before the commencement of 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 decision.
Due diligence should extend to checking that the answers on the application form are correct. Regardless of how remote a claim on the lender insurance policy might be you can rest assured that the insurer will check the details on any proposal form thoroughly before any claim is paid out.
Contingent Buildings Indemnity Insurance has limitations - Additional considerations
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from contingent buildings insurance may be adequate for your client. Information provided 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 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.