Lack of Planning Permission Indemnity Insurance Lender conveyancing requirements
Yorkshire Bank Home Loans and Lloyds TSB, in common with the majority of lenders, have their own requirements when it comes to lack of planning permission indemnity insurance. The purpose of this page to assist residential conveyancing practitioners on the different mortgage company conveyancing panel where the title to be charged includes lack of planning permission. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each lender, be it Godiva Mortgages, Nationwide or Halifax. The information 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?
As a solicitor on a mortgage company panel you must investigate (including any supplemental enquiries to clarify any issues which may arise) to ensure the property has the correct planning consents (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 used as residential property or that the property may be the subject of enforcement action.
Where there is evidence of such a breach or matter but in your professional opinion there is no reasonable likelihood of enforcement action and, following appropriate enquiries, and you are satisfied that the title is good and marketable and are able to issue an unconditional certificate of title, the bank may not insist on Lack of Planning Permission indemnity insurance and you may go ahead without it.
Where there is such evidence and all outstanding conditions will not be satisfied by completion, where you are not able to provide an unqualified certificate of title, you should notify this to the lender in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as Yorkshire Bank Home Loans or Lloyds TSB may take a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Insurance is typically needed where there is no proof of compliance with conditions can be produced for works that have been in existence for for over twelve months, whether a residential premises 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 pay the premium for the Lack of Planning Permission Indemnity Insurance, which would be taken out in the purchaser’s name as well as the mortgage company.
A lack of planning permission indemnity insurance policy is in most cases less expensive than gaining retrospective consent and is certainly much quicker. The flipside is that the risk of enforcement action still remains.
Barnsley BS and Barclays as with most banks, obligations require that where lack of planning permission indemnity insurance is to be taken out:
- your firm must approve the terms of the lack of planning permission policy on behalf of the mortgage company
- the lack of planning permission indemnity insurance policy should always be for the benefit of the lender and, if possible, for the benefit of the borrower and any next owner or mortgagee. Where the borrower will not be protected by the lack of planning permission indemnity insurance policy, you must advise the borrower of this fact.
- the lack of planning permission indemnity insurance policy should be effected without cost to the mortgage company
- the lack of planning permission indemnity insurance policy must not incorporate terms that you recognise would void or prejudice the interests of the lender
- you is duty bound to spell out to the borrower that the borrower is obliged to comply with any conditions of the lack of planning permission indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in relation to the policy
- your practice is required to reveal to the insurer all relevant information which you have acquired
- your firm must provide 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 additional insurance may be mandatory if there is further lending against the security of the property
- the minimum level of cover for the policy must satisfy the requirements for the mortgage company (See Part II Handbook requirements )
| Lender | Requirement |
|---|---|
| Accord Buy to Let | 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Barclays plc | Higher of purchase price or valuation |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Chelsea 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. |
| Clydesdale Bank | Open market value of property. |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Habito | Higher of purchase price or valuation |
| JPMorgan | 110% of principal sum. |
| 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. |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| 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. |
| Platform | 110% of principal sum. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage 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). |
| Scottish Building Society | Amount of mortgage plus 25%. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| RBS - Direct Line | An amount equal to the value of the property. |
| RBS (One Account) | An amount equal to the value of the property. |
Non lender-specific considerations
The extent of the terms for lack of planning permission indemnity insurance are identified in the policy document. Property lawyers are obliged to point your non-lender client to the lack of planning permission indemnity insurance policy document. Lack of Planning Permission indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to ensure it is as it should be. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Important characteristics and benefits of lack of planning permission Contingency insurance :
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the lack of planning permission indemnity insurance schedule. Lack of Planning Permission indemnity insurance Policies are likely to cover the following- 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.
- 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 insurance, to the extent that such costs are rendered abortive by court order.
- Cover for compensation incurred in any action concerning the risks specified in the lack of planning permission indemnity insurance, including fees of a legal nature.
- Diminution in value due to the successful enforcement of the risks specified in the lack of planning permission insurance.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- Money paid with consent in writing from the insurance company to free the property from the risks specified in the lack of planning permission 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 be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being met.
Other considerations for lack of planning permission indemnity insurance
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 is in relation to properties in England and Wales.