Indemnity Insurance of Contingent Buildings Lender conveyancing requirements

Natwest and HSBC, as with the majority of banks, set their own specific instructions when it comes to contingent buildings indemnity insurance. This page is designed to help conveyancing firms on the different mortgage company approved list of panel lawyers where the title to be charged contains contingent buildings. It is not a substitute for checking the CML handbook requirements for each mortgage company, for example Godiva Mortgages, Barclays or Birmingham Midshires. 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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Skipton and Yorkshire Bank Home Loans as with the majority of lenders, obligations require that where contingent buildings indemnity insurance is to be put on risk:

• the minimum level of cover for the policy must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• your firm must supply a duplicate 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 a further policy may be necessary if there is supplemental lending against the mortgaged property
• the contingent buildings indemnity insurance policy should always be for the benefit of the bank and, wherever possible, for the benefit of the mortgagor and any next owner or mortgage company. Where the mortgagor will not be covered by the contingent buildings indemnity insurance policy, the borrower needs to be informed accordingly.
• you are responsible for approving the terms of the contingent buildings policy on behalf of the mortgage company
• the contingent buildings indemnity insurance policy should be placed on risk without expense to the bank
• your practice is obliged to reveal to the insurer all relevant information which you have gathered
• the contingent buildings indemnity insurance policy must not contain terms that you know would invalidate or compromise the interests of the bank
• your practice is duty bound to spell out to the borrower that the borrower must comply with any conditions of the contingent buildings indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the insurance

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 lenders:

General Contingent Buildings indemnity insurance points to consider

The extent of the terms for contingent buildings indemnity insurance are identified in the policy document. Property lawyers should point your non-lender client to the contingent buildings indemnity insurance policy itself. Contingent Buildings Contingency insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to ensure it is as it should be. The continuance of this non-investment insurance contract 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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Significant characteristics and benefits of contingent buildings indemnity insurance :

This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Contingent Buildings indemnity insurance Policies are likely to cover the following

• Money paid with the written consent of the insurance company to liberate 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
• Market value reduction resulting from the successful enforcement of the risks specified in the contingent buildings policy.
• Reimbursement for compensation incurred in any action concerning the risks specified in the contingent buildings indemnity insurance, as well as solicitors charges.
• The out of pocket expenses 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.
• Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the contingent buildings policy, to the extent that such costs are rendered abortive by court decision.

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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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Additional considerations for contingent buildings indemnity insurance

Contingent Buildings 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 contingent buildings indemnity cover will not necessarily be the answer.

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