Bank conveyancing panel conditions re Insolvency Act Indemnity Insurance
HSBC and Coventry BS, as with most mortgage companies, dictate their own specific instructions when it comes to insolvency act indemnity insurance. This page sets out to enlighten domestic conveyancing lawyers on the different lender solicitors panel where the title to be charged includes insolvency act. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, be it Halifax, Godiva Mortgages or Yorkshire Bank Home Loans. The information on this page is not focused on insolvency act indemnity insurance requirements.
Need help with insolvency act indemnity insurance from your lender?
Practicing as a conveyancing practitioner on a lender panel, you must report to the bank if you are aware that the title to the property is subject to a Insolvency Act or a transaction at an apparent undervalue completed in the past five years of the proposed charge. You need to be sure that the mortgage company will acquire their interest in good faith and will be protected under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. If you are not able to submit an unqualified certificate of title, you must arrange transfer at undervalue or Insolvency Act indemnity insurance.
You must also obtain clear bankruptcy checks against all parties to any deed of gift or transaction at an apparent undervalue.
About Insolvency Act Indemnity Insurance
Many conveyancing practitioner throughout the country often recommend Insolvency Act policies owing to a proposed or existing transfer at undervalue or deed of gift including gifts of money towards the acquisition of a residence. The loss arises because if the person who transferred or “gifted” the property (or the money) becomes bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the property.
Leeds Building Society and Bank of Scotland in common with many mortgage companies, instructions are such that where insolvency act indemnity insurance is effected:
- the insolvency act indemnity insurance policy must be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any future owner or bank. Where the mortgagor will not be protected by the insolvency act indemnity insurance policy, you must advise the borrower of this fact.
- the level of indemnity must satisfy the requirements for the lender (See Part II Handbook requirements )
- your firm is required to disclose to the insurer all relevant information which you have obtained
- your firm must approve the terms of the insolvency act policy on behalf of the bank
- the insolvency act indemnity insurance policy should not contain conditions that you are aware would invalidate or prejudice the interests of the bank
- you must spell out to the borrower that the borrower must adhere to any conditions of the insolvency act indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in relation to the policy
- the insolvency act indemnity insurance policy should be placed on risk at no cost to the lender
- your practice must provide a copy of the insolvency act indemnity insurance to the mortgagor and explain to the borrower why the insolvency act indemnity insurance policy was effected and that a further policy might be required if there is further lending against the security of the property
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Halifax | An amount at least equal to the mortgage advance. |
| Hodge | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| Hodge Equity Release | An amount equal to the purchase price or value, whichever is higher. Any indemnity insurance policy must be for our benefit, that of any transferee/assignee (legal or equitable) of the mortgage, the borrower(s) and any successor in Title. |
| ITL Mortgages | Minimum of the value of the property. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| NRAM Ltd | 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. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| Pepper Money | An amount equal to at least 110% of the purchase price or value, whichever is higher. 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). |
| RBS - Virgin One | An amount equal to the value of the property. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
| Topaz Finance | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
| Whistletree | The value of the property |
| Yorkshire Bank | Open market value of property. |
Insolvency Act Contingency Insurance : Reflections
The full terms, conditions and exclusions for insolvency act indemnity insurance are set out in the policy paperwork. Conveyancing solicitors should direct your non-lender client to the insolvency act indemnity insurance policy itself. The intention of insolvency act indemnity insurance is to afford indemnity in respect of the risks specified in the policy schedule - so it is essential check any draft to ensure it is in order. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the insolvency act indemnity insurance policy. It is well worth checking that the time frame is correct.Insolvency Act Contingency insurance: Important aspects and benefits:
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the insolvency act indemnity insurance schedule. Insolvency Act indemnity insurance Policies are likely to cover the following- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the insolvency act indemnity insurance, to the extent that such costs are rendered abortive by court decision.
- 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.
- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the insolvency act indemnity insurance.
- Cover for compensation incurred in any proceedings in respect of the risks specified in the insolvency act indemnity insurance, including fees of a legal nature.
- Market value reduction resulting from the successful enforcement of the risks specified in the insolvency act indemnity insurance.
You also need to be sure that the answers on the application form are correct. Regardless of how remote a claim on the lender insurance policy might be you can rest assured that the insurer will check the details on any proposal form very carefully prior to any claim being paid out.
Insolvency Act Indemnity Insurance has limitations - Other considerations
Insolvency Act insurance may satisfy lenders such as Lloyds TSB or Chelsea BS and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.The content set out above covers to properties in England and Wales.