Contingent Buildings Indemnity Insurance Lender conveyancing requirements

Accord and Barclays, as with most banks, have their own specific instructions when it comes to contingent buildings indemnity insurance. This page sets out to enlighten property law solicitors on the numerous bank solicitors panel where the title for the the property to be mortgaged includes contingent buildings. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, for example Godiva Mortgages, Birmingham Midshires or Virgin Money. 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?

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HSBC and Leeds Building Society in common with most lenders, instructions are such that where contingent buildings indemnity insurance is to be put on risk:

• your practice must send a duplicate of the contingent buildings indemnity insurance to the mortgagor and explain to the mortgagor why the contingent buildings indemnity insurance policy was effected and that additional insurance might be required if there is further borrowing against the security of the property
• you is required to disclose to the insurer all relevant information which you have gathered
• your practice must approve the terms of the contingent buildings policy on behalf of the bank
• the limit of indemnity must meet the requirements for the bank (See Part II Handbook requirements )
• the contingent buildings indemnity insurance policy should always be for the benefit of the lender and, wherever possible, for the benefit of the mortgagor and any future owner or mortgage company. Where the mortgagor will not be protected by the contingent buildings indemnity insurance policy, you must advise the mortgagor of this fact.
• your practice must point out to the borrower that the borrower will need to adhere to 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
• the contingent buildings indemnity insurance policy must be placed on risk at no expense to the bank
• the contingent buildings indemnity insurance policy must not incorporate terms which you recognise would invalidate or prejudice the interests of the bank

Regarding the extent 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 full terms, conditions and exclusions for contingent buildings indemnity insurance are shown in the policy paperwork. Conveyancing Practitioners are obliged to direct 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 agreement is in perpetuity unless otherwise stated in the contingent buildings indemnity insurance policy. Adequacy in this regard should be checked.

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Important aspects 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 Cover normally includes

• All sums paid with consent in writing from the insurance company to liberate the property from the risks specified in the contingent buildings indemnity insurance.
• The out of pocket expenses 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.
• All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, 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.
• Cover for compensation incurred in any proceedings in respect of the risks specified in the contingent buildings indemnity insurance, as well as solicitors charges.
• Market value reduction resulting from the successful enforcement of the risks specified in the contingent buildings policy.

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Always consider what is not included in the contingent buildings indemnity insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the commencement of the policy? Are legal costs covered?

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Other considerations for contingent buildings indemnity insurance

Contingent Buildings insurance may satisfy lenders such as Bank of Scotland or Lloyds TSB 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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The content set out above covers to properties in England and Wales.