Contingent Buildings Indemnity Insurance Lender conveyancing requirements
RBS and Lloyds TSB, in common with the majority of lenders, have their own requirements when it comes to contingent buildings indemnity insurance. This page sets out to enlighten property law firms on the different lender conveyancing panel where the title to be charged includes contingent buildings. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Halifax, Santander or Natwest. The information on this page Is not to be read as contingent buildings indemnity insurance advice.
Need help with contingent buildings indemnity insurance from your lender?
Nationwide and Chelsea BS like most mortgage companies, requirements are that where contingent buildings indemnity insurance is to be put on risk:
- you must approve the terms of the contingent buildings policy on behalf of the lender
- the contingent buildings indemnity insurance policy should always be in favor of the lender and, wherever possible, for the benefit of the borrower and any future registered proprietor or mortgagee. If the mortgagor will not be protected by the contingent buildings indemnity insurance policy, the borrower should be advised accordingly.
- your practice must disclose to the insurer all relevant information which you have acquired
- your practice must spell out to the borrower that the borrower will need 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 relation to the insurance
- the limit of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
- the contingent buildings indemnity insurance policy should be placed on risk at no charge to the lender
- the contingent buildings indemnity insurance policy must not incorporate terms that you recognise would void or compromise the interests of the bank
- your practice must provide a copy 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 a further policy might be necessary if there is additional borrowing against the mortgaged property
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Bradford & Bingley | Amount of loan + 15% |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Hampden | The open market value of the property according to the valuation report. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Hinckley and Rugby | The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Mortgage Express | Amount of loan + 15% |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| Scottish Building Society | Amount of mortgage plus 25%. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
| Yorkshire Bank | Open market value of property. |
Non lender-specific considerations
The extent of the terms for contingent buildings indemnity insurance are explained in the policy document. Conveyancing Practitioners are obliged to point the borrower to the contingent buildings indemnity insurance policy document. The intention of contingent buildings indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it’s important to check the document to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the contingent buildings indemnity insurance policy. Adequacy in this regard should be checked.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- Reimbursement for compensation incurred in any proceedings concerning the risks specified in the contingent buildings indemnity insurance, including solicitors charges.
- The cost 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.
- All sums paid with consent in writing from the insurance company to liberate the property from the risks specified in the contingent buildings insurance.
- Market value reduction resulting from the successful enforcement of the risks specified in the contingent buildings policy.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, 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 decision.
You also need to be sure that the answers on the application form are accurate. However remote the likelihood of a claim on the mortgage company insurance policy might be you can certain that the insurer will check the details on any proposal form thoroughly before any claim is met.
Contingent Buildings Indemnity Insurance has limitations - Further 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 conveyancing panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the lender 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 above information covers to properties in England and Wales.