Lender conveyancing panel requirements re Defective Title Indemnity Insurance
Leeds Building Society and Virgin Money, in common with many lenders, set their own specific instructions when it comes to defective title indemnity insurance. The purpose of this page to assist conveyancing practitioners on the numerous lender conveyancing panel where the title for the the property to be mortgaged contains defective title. Solicitors should still check the CML handbook requirements for each lender, for example Barclays, Chelsea BS or Godiva Mortgages. The information on this page Is not to be read as defective title indemnity insurance advice.
Need help with defective title indemnity insurance from your lender?
Being a solicitor on a lender panel, you must notify to the lender if you are aware that the title to the property was based on adverse possession or possessory title. This may be acceptable if the seller is or on completion the borrower will be registered at the Land Registry as registered proprietor of a possessory title. In the case of lost title deeds, the statutory declaration must explain the loss satisfactorily.
A lender will need defective title indemnity insurance where there are buildings on the part in question or where the land is essential for access or services;
A bank may not require defective title indemnity insurance in transactions where such title affects land on which no buildings are erected or which is not essential for access or services. In such cases, you must send a plan of the whole of the land to be mortgaged to the lender identifying the area of land having possessory or defective title. The lender will refer the disclosure to their valuer so that an assessment can be made of the proposed security. The lender will then notify you of any additional requirements or if a revised mortgage offer is to be resent.
About Defective Title Indemnity Insurance
Many conveyancing practitioner accross the country regularly rely on defective title policies owing to because a property or land has only been registered with a less that perfect title at the Land Registry, usually arising from lost deeds or adverse possession. Defective title insurance tends to indemnify the insured upon challenge to the title resulting in damages or compensation awarded by a court or the Lands Tribunal, the cost of altering or demolishing all or any part of the property to comply with a court order or injunction and reduction in market value of the property prior to and after any estate right title restrictive covenant or interest being established adverse to or in derogation of the Insured’s title to the property.
Natwest and Yorkshire Bank Home Loans in common with many lenders, requirements are that where defective title indemnity insurance is to be put on risk:
- the defective title indemnity insurance policy should be placed on risk without expense to the mortgage company
- the level of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your firm is obliged to disclose to the insurer all relevant information which you have obtained
- your practice are responsible for approving the terms of the defective title policy on behalf of the mortgage company
- the defective title indemnity insurance policy must not contain terms which you know would invalidate or prejudice the interests of the lender
- you is duty bound to spell out to the borrower that the borrower is obliged to adhere to any conditions of the defective title indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in respect of the policy
- the defective title indemnity insurance policy needs to be for the benefit of the lender and, if possible, for the benefit of the mortgagor and any next registered proprietor or bank. Where the mortgagor will not be protected by the defective title indemnity insurance policy, the borrower needs to be advised accordingly.
- you must supply a duplicate of the defective title indemnity insurance to the mortgagor and explain to the borrower why the defective title indemnity insurance policy was effected and that a further policy could be necessary if there is supplemental lending against the mortgaged property
| Lender | Requirement |
|---|---|
| Accord Mortgages | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Aldermore Bank | 110% of the purchase price or valuation, whichever is greater. 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). |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| 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% |
| Barnsley Building Society | An amount at least equal to the amount of the mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Harpenden Building Society | 110% of mortgage advance |
| JPMorgan | 110% of principal sum. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| 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. |
| Leeds Building Society | An amount at least equal to the amount of the mortgage advance plus 10%. Any indemnity insurance policy must protect the borrowers, any successor in title and any Mortgagee. |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| 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. |
| Reliance Bank | \xA31,000,000.00 |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| RBS - Direct Line One | An amount equal to the value of the property. |
General Defective Title indemnity insurance points to consider
The extent of the terms for defective title indemnity insurance are explained in the policy paperwork. Conveyancing Practitioners are obliged to direct your non-lender client to the defective title indemnity insurance policy paperwork. The intention of defective title indemnity insurance is to grant 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 continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the defective title indemnity insurance policy. Adequacy in this regard should be checked.Significant characteristics and benefits of defective title 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. Defective Title indemnity insurance Policies should be checked for the following- 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.
- Reimbursement for compensation incurred in any action in respect of the risks specified in the defective title indemnity insurance, as well as fees of a legal nature.
- Diminution in value resulting from the successful enforcement of the risks specified in the defective title policy.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the defective title policy, to the extent that such costs are rendered abortive by court order.
- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the defective title insurance.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurer
Due diligence should extend to checking that the answers on the application form are correct. However remote the likelihood of a claim on the bank insurance policy might be you can certain that the insurer will check the details on any proposal form very carefully prior to any claim being met.
Supplemental considerations for defective title indemnity insurance
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from defective title insurance may be adequate for your client.The content set out above is in relation to properties in England and Wales.