Lender conveyancing panel requirements re Lack of Building Regulation Approval Indemnity Insurance
Natwest and Barclays, as with most banks, dictate their own requirements when it comes to lack of building regulation approval indemnity insurance. The content herein aims to help property law lawyers on the numerous bank approved list of panel lawyers where the title to be charged includes lack of building regulation approval. It is not a substitute for checking the CML handbook requirements for each mortgage company, be it Virgin Money, Santander or HSBC. The information on this page Is not to be read as lack of building regulation approval indemnity insurance advice.
Need help with lack of building regulation approval indemnity insurance from your lender?
As a conveyancing practitioner on a lender panel you must conduct due diligence as to (including any further enquiries to clarify any issues which may arise) to ensure the property or any works thereto has the benefit of any necessary Building Regulation Approval and that the property may be the subject of enforcement proceedings.
Where there is evidence of a lack of building regulation approval but in your professional judgment there is no reasonable chance of enforcement action and, following appropriate enquiries, and you are assured that there is a good and marketable title and are able to issue an unconditional COT, the bank may not require lack of building regulation approval indemnity insurance and you may proceed.
Where there is such evidence that not all building regulation approvals will be in place on completion, where you are not able to provide an unqualified certificate of title, you should reveal this to the bank in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as Natwest or Barclays will take a different stance.
About Lack of Building Regulation Approval Indemnity Insurance
Lack of Building Regulation Approval Insurance is typically required where no proof of building regulation consent can be produced for alterations (or FENSA certificate for doors) that have existed for for over a year, whether a residential residence or large commercial project. The consequential losses flow from the successful enforcement action by the local authority. In a typical conveyancing scenario the seller would be expected to pay the premium for the Lack of Building Regulation Approval Indemnity Insurance, which would be taken out in the buyer’s name as well as the mortgage company.
A lack of building regulation approval indemnity insurance policy is normally more cost effective than obtaining retrospective certificate and is without question significantly quicker. The flipside is that the risk of enforcement action does not disappear.
Coventry BS and RBS like the majority of mortgage companies, instructions are such that where lack of building regulation approval indemnity insurance is to be taken out:
- the lack of building regulation approval indemnity insurance policy must be effected without charge to the bank
- the minimum level of cover for the policy must meet the requirements for the mortgage company (See Part II Handbook requirements )
- your practice is duty bound to explain to the mortgagor that the borrower is obliged to adhere to any conditions of the lack of building regulation approval indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
- the lack of building regulation approval indemnity insurance policy needs to be for the benefit of the bank and, wherever possible, for the benefit of the borrower and any future registered proprietor or bank. Where the mortgagor will not be covered by the lack of building regulation approval indemnity insurance policy, the borrower should be advised accordingly.
- the lack of building regulation approval indemnity insurance policy should not contain terms that you recognise would void or prejudice the interests of the mortgage company
- your firm must provide a copy of the lack of building regulation approval indemnity insurance to the borrower and explain to the mortgagor why the lack of building regulation approval indemnity insurance policy was effected and that additional insurance may be necessary if there is supplemental lending against the mortgaged property
- you must disclose to the insurer all relevant information which you have gathered
- your firm must approve the terms of the lack of building regulation approval policy on behalf of the mortgage company
| Lender | Requirement |
|---|---|
| Adam & Company | The open market value of the property according to the valuation report. |
| 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. |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| 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. |
| Holmesdale Building Society | 110% |
| Intelligent Finance | An amount at least equal to the total of the initial mortgage advance plus any pre-agreed reserve. These amounts will be shown in the mortgage offer. |
| JPMorgan | 110% of principal sum. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Magellan Homeloans | At least equal to the value of the property |
| Metro Bank | The open market value of the property according to the valuation report. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Swansea Building Society | Purchase price or market valuation whichever is the higher |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Royal Bank of Scotland | 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 |
| Zephyr Mortgages | 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. |
General Lack of Building Regulation Approval indemnity insurance points to consider
The extent of the terms for lack of building regulation approval indemnity insurance are identified in the policy paperwork. Conveyancing Practitioners are obliged to point the borrower to the lack of building regulation approval indemnity insurance policy paperwork. Lack of Building Regulation Approval indemnity insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so you should check the schedule to ensure it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the lack of building regulation approval indemnity insurance policy. Adequacy in this regard should be checked.Important features and benefits of lack of building regulation approval 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. Lack of Building Regulation Approval indemnity insurance Policies are likely to cover the following- Money paid with the written consent of the insurance company to free the land from the risks specified in the lack of building regulation approval indemnity insurance.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the lack of building regulation approval policy, including solicitors charges.
- Diminution in value resulting from the successful enforcement of the risks specified in the lack of building regulation approval policy.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development started, before the commencement of proceedings for the enforcement of the risks specified in the lack of building regulation approval policy, to the extent that such costs are rendered abortive by court order.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- The out of pocket expenses of altering or taking down 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.
Don't forget to check what is excluded from the lack of building regulation approval policy e.g. does the policy cover any property that has been altered within the 12 months prior to the commencement of the policy? Are legal costs covered?
Supplemental considerations for lack of building regulation approval indemnity insurance
Lack of Building Regulation Approval 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 lack of building regulation approval indemnity cover will not necessarily be the answer.The content set out above covers to properties in England and Wales.