Deed of Gift Indemnity Insurance Mortgage Company conveyancing requirements

Virgin Money and Yorkshire Bank Home Loans, as with many lenders, set their own requirements when it comes to deed of gift indemnity insurance. This page sets out to enlighten property law lawyers on the different bank approved list of panel lawyers where the title for the the property to be mortgaged incorporates deed of gift. Solicitors should still check the CML handbook requirements for each mortgage company, for example Natwest, HSBC or Skipton. The information on this page is not focused on deed of gift indemnity insurance requirements.

Need help with deed of gift indemnity insurance from your lender?

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In your capacity as a conveyancing practitioner on a mortgage company panel, you must disclose to the mortgage company if you are aware that the title to the property is subject to a deed of gift or a transaction at an apparent undervalue completed in the past five years of the proposed home loan. You must be sure that the lender will not be compromised under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. Where you are unable to provide an unconditional certificate of title, you must arrange transfer at undervalue or deed of gift indemnity insurance .

You must also obtain clear bankruptcy checks against all parties to any deed of gift or transaction at an apparent undervalue.

About Deed of Gift Indemnity Insurance

Thousands of conveyancers throughout the UK often recommend Deed of Gift insurance owing to an expected or existing transfer at undervalue or deed of gift including gifts of money towards the purchase of a property. The loss arises where the person who transferred or “gifted” the premises (or the money) becomes bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.

Bank of Scotland and Nationwide as with most banks, obligations require that where deed of gift indemnity insurance is effected:

• your practice must approve the terms of the deed of gift policy on behalf of the mortgage company
• your firm must disclose to the insurer all relevant information which you have acquired
• your practice must explain to the mortgagor that the borrower will need to adhere to any conditions of the deed of gift indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the insurance
• the deed of gift indemnity insurance policy should be effected without expense to the bank
• the deed of gift indemnity insurance policy must be in favor of the lender and, if possible, in favour of the mortgagor and any future owner or lender. If the borrower will not be protected by the deed of gift indemnity insurance policy, you must advise the mortgagor of this fact.
• the deed of gift indemnity insurance policy should not contain conditions which you know would void or prejudice the interests of the mortgage company
• you must provide a duplicate of the deed of gift indemnity insurance to the mortgagor and explain to the borrower why the deed of gift indemnity insurance policy was effected and that additional insurance could be required if there is further borrowing against the security of the property
• the limit of indemnity must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )

Regarding the extent of cover for the deed of gift indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the Part 2 requirements for banks:

Deed of Gift Contingency Insurance : Reflections

The full terms, conditions and exclusions for deed of gift indemnity insurance are set out in the policy paperwork. Conveyancing solicitors are obliged to point your non-lender client to the deed of gift indemnity insurance policy paperwork. The intention of deed of gift indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so you should check the schedule to determine that it is in order. The continuance of this non-investment insurance contract is in perpetuity unless otherwise stated in the deed of gift indemnity insurance policy. Again, please check that this is as you expected.

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Important aspects and benefits of deed of gift Contingency insurance :

Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Deed of Gift indemnity insurance Cover normally includes

• Loss in market value resulting from the successful enforcement of the risks specified in the deed of gift policy.
• All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• The cost of 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 deed of gift insurance, to the extent that such costs are rendered abortive by court order.
• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the deed of gift insurance, as well as solicitors charges.
• Money paid with the written consent of the insurance company to liberate the property from the risks specified in the deed of gift insurance.
• The out of pocket expenses 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.

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The above information covers to properties in England and Wales.