Lender conveyancing panel requirements re Lack of Planning Permission Indemnity Insurance
Yorkshire Bank Home Loans and Barnsley BS, like the majority of mortgage companies, dictate their own requirements when it comes to lack of planning permission indemnity insurance. This page is designed to help residential conveyancing lawyers on the numerous lender conveyancing panel where the title for the the property to be mortgaged includes lack of planning permission. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each bank, for example Santander, Coventry BS or Virgin Money. The content on this page is not focused on lack of planning permission indemnity insurance requirements.
Need help with lack of planning permission indemnity insurance from your lender?
In your capacity as a conveyancing practitioner on a mortgage company panel you must enquire (including any supplemental queries to clarify any issues which may arise) to ensure the residence has the appropriate planning permissions (including listed building consent) for its construction and any subsequent change to the property and its current use; and there is no apparent breach of the conditions of that or any other consent or certificate affecting the property; and that no matter is revealed which would preclude the residence from being utilised as residential property or that the property may be the subject of enforcement proceedings.
Where there is evidence of a breach of planning permission but in your professional judgment there is no reasonable prospect of enforcement action and, following appropriate enquiries, and you are assured that the title is good and marketable and can provide an unqualified COT, the bank may not require Lack of Planning Permission indemnity insurance and you may proceed.
If there is such evidence and all outstanding conditions will not be satisfied by completion, where you are not able to provide an unconditional certificate of title, you should disclose this to the bank in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each mortgage company such as Yorkshire Bank Home Loans or Barnsley BS may adopt a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Cover is typically required where there is no verification of compliance with conditions can be supplied for works that have been in existence for a year or more, whether a domestic property or large commercial project. The consequential losses flow from the successful enforcement proceedings by the local authority. In a typical conveyancing scenario the vendor would be expected to cover the costs of the Lack of Planning Permission Indemnity Insurance, which would be taken out in the buyer’s name as well as the mortgage company.
A lack of planning permission indemnity insurance policy is ordinarily less expensive than applying for retrospective consent and is without question significantly quicker. The flipside is that the risk of enforcement action still remains.
RBS and Lloyds TSB like the majority of banks, obligations require that where lack of planning permission indemnity insurance is to be put on risk:
- your practice must send a copy of the lack of planning permission indemnity insurance to the mortgagor and explain to the borrower why the lack of planning permission indemnity insurance policy was effected and that a further policy may be necessary if there is additional lending against the security of the property
- the level of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your practice must reveal to the insurer all relevant information which you have acquired
- the lack of planning permission indemnity insurance policy must not contain conditions that you recognise would invalidate or prejudice the interests of the mortgage company
- the lack of planning permission indemnity insurance policy should be placed on risk without charge to the lender
- your firm are responsible for approving the terms of the lack of planning permission policy on behalf of the bank
- the lack of planning permission indemnity insurance policy must be in favor of the bank and, if possible, in favour of the mortgagor and any subsequent registered proprietor or mortgagee. Where the borrower will not be protected by the lack of planning permission indemnity insurance policy, the borrower needs to be informed accordingly.
- your firm is duty bound to point out to the mortgagor that the borrower will need to adhere to any conditions of the lack of planning permission indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the policy
| Lender | Requirement |
|---|---|
| April Mortgages | An amount at least equal to the mortgage advance. |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Kensington Mortgage | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Lloyds | The value of the property. |
| Lloyds Bank Private Banking | Not less than the Facility plus 10%. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| 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 |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed 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). |
| RBS - Direct Line | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
Lack of Planning Permission Contingency Insurance : Reflections
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are set out in the policy paperwork. Property lawyers should point the borrower to the lack of planning permission indemnity insurance policy paperwork. Lack of Planning Permission Contingency insurance is devised to grant indemnity in respect of the risks specified in the policy schedule - so it’s important to check the schedule to determine that it is as it should be. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Important characteristics and benefits of lack of planning permission 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 Planning Permission indemnity insurance Policies should be checked for the following- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurer
- 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.
- Market value reduction resulting from the successful enforcement of the risks specified in the lack of planning permission policy.
- The cost of works (including professional fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the lack of planning permission indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Reimbursement for compensation incurred in any proceedings in respect of the risks specified in the lack of planning permission policy, as well as legal and associated costs.
- All sums paid with consent in writing from the insurance company to liberate the land from the risks specified in the lack of planning permission insurance.
Due diligence should extend to checking that the answers on the application form are correct. Regardless of how remote a claim on the bank 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.
Lack of Planning Permission Indemnity Insurance has limitations - Further considerations
Lack of Planning Permission 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 planning permission indemnity cover will not necessarily be the right solution.The content set out above covers to properties in England and Wales.