Indemnity Insurance of Contingent Buildings Lender conveyancing instructions

Chelsea BS and Barnsley BS, as with the majority of banks, set their own requirements when it comes to contingent buildings indemnity insurance. The content herein aims to help property law lawyers on the numerous mortgage company conveyancing panel where the title to be charged contains contingent buildings. It is not a alternative for checking the CML handbook requirements for each bank, be it Godiva Mortgages, Birmingham Midshires or Barclays. The information 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 Leeds Building Society as with many banks, obligations require that where contingent buildings indemnity insurance is to be taken out:

• the contingent buildings indemnity insurance policy must not contain terms that you are aware would void or compromise the interests of the lender
• you must reveal to the insurer all relevant information which you have obtained
• your practice are responsible for approving the terms of the contingent buildings policy on behalf of the mortgage company
• the contingent buildings indemnity insurance policy must be for the benefit of the bank and, wherever possible, for the benefit of the mortgagor and any subsequent owner or lender. Where the mortgagor will not be covered by the contingent buildings indemnity insurance policy, the mortgagor should be informed accordingly.
• the level of indemnity must meet the requirements for the lender (See Part II Handbook requirements )
• the contingent buildings indemnity insurance policy must be placed on risk without expense to the lender
• you must explain to the mortgagor that the borrower is obliged to comply with any conditions of the contingent buildings indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the insurance
• you must supply 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 a further policy may be required if there is further lending against the mortgaged property

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 mortgage companies:

Non lender-specific considerations

The full terms, conditions and exclusions for contingent buildings indemnity insurance are set out in the policy paperwork. Property lawyers should point the borrower to the contingent buildings indemnity insurance policy itself. The intention of contingent buildings indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to ensure 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.

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Contingent Buildings Contingency insurance: Important characteristics and benefits:

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 Policies should be checked for the following

• 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 indemnity insurance, to the extent that such costs are rendered abortive by court decision.
• Reimbursement for compensation incurred in any proceedings regarding the risks specified in the contingent buildings insurance, including incurred costs and expenses.
• All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
• Diminution in value resulting from the successful enforcement of the risks specified in the contingent buildings policy.
• All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the contingent buildings policy.
• The cost 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.

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Always check what is excluded from the contingent buildings indemnity insurance e.g. does the policy cover any residence that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?

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Other considerations for contingent buildings indemnity insurance

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.

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The above information covers to properties in England and Wales.