Indemnity Insurance of Contingent Buildings Bank conveyancing requirements
HSBC and Accord, as with the majority of mortgage companies, have their own specific instructions when it comes to contingent buildings indemnity insurance. This page sets out to enlighten conveyancing practitioners on the various bank conveyancing panel where the title for the the property to be mortgaged incorporates contingent buildings. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, be it Chelsea BS, Leeds Building Society or Natwest. 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?
Nationwide and RBS as with many banks, obligations require that where contingent buildings indemnity insurance is to be put on risk:
- you must supply 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 a further policy might be necessary if there is supplemental borrowing against the mortgaged property
- your practice are responsible for approving the terms of the contingent buildings policy on behalf of the lender
- the contingent buildings indemnity insurance policy must not contain conditions which you know would void or compromise the interests of the lender
- your firm is obliged to reveal to the insurer all relevant information which you have obtained
- the contingent buildings indemnity insurance policy should always be in favor of the lender and, if possible, in favour of the borrower and any subsequent registered proprietor or bank. Where the borrower will not be covered by the contingent buildings indemnity insurance policy, you must advise the mortgagor of this fact.
- you must explain to the mortgagor that the borrower must adhere to any conditions of the contingent buildings indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in relation to the insurance
- the contingent buildings indemnity insurance policy should be effected at no expense to the bank
- the minimum level of cover for the policy must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Adam & Company | The open market value of the property according to the valuation report. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Bluestone Mortgages | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Coventry Building Society | Minimum of the value of the property. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Godiva Mortgages | Minimum of the value of the property. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Holmesdale Building Society | 110% |
| Landmark | Preference for full market value of the property, but if this level of cover is not available, will accept a minimum of the actual loan amount. You must approve the policy on our behalf. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Saffron Building Society | Higher of purchase price or valuation. 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). |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
| Ulster Bank | An amount equal to the value of the property. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| Whistletree | The value of the property |
Non lender-specific considerations
The full terms, conditions and exclusions for contingent buildings indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners should point your non-lender client to the contingent buildings indemnity insurance policy paperwork. The intention of contingent buildings indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to determine that it is as it should be. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the contingent buildings indemnity insurance policy. It is well worth checking that the time frame is correct.Important aspects and benefits of contingent buildings Contingency 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 insurance, including fees of a legal nature.
- All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the contingent buildings policy.
- The cost of works (including professional fees) for the purpose of the development commenced, 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 order.
- Market value reduction due to the successful enforcement of the risks specified in the contingent buildings indemnity insurance.
- 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 ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
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 be invalidated.
Contingent Buildings Indemnity Insurance has limitations - Supplemental considerations
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 right solution. Information provided on this webpage is for general information for conveyancers and solicitors in England and Wales on the the bank conveyancing 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 above information is in relation to properties in England and Wales.