Indemnity Insurance of Lack of Planning Permission Lender conveyancing requirements
RBS and Skipton, like the majority of mortgage companies, have their own requirements when it comes to lack of planning permission indemnity insurance. The purpose of this page to assist residential conveyancing lawyers on the various lender approved list of panel lawyers where the title for the the property to be mortgaged incorporates lack of planning permission. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each mortgage company, whether it be Chelsea BS, Yorkshire Building Society or Bank of Scotland. The information on this page Is not to be read as lack of planning permission indemnity insurance advice.
Need help with lack of planning permission indemnity insurance from your lender?
As a solicitor on a mortgage company panel you must enquire (including any further enquiries to clarify any issues which may arise) to ensure the property 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 evidence of any breach of the conditions of that or any other consent or certificate affecting the property; and that no matter is revealed which would prohibit the property from being utilised 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 judgment there is no reasonable chance of enforcement action and, following appropriate enquiries, and you are content that there is a good and marketable title and are in a position to submit an unqualified COT, the lender may not require Lack of Planning Permission indemnity insurance and you may proceed.
Where there is such evidence and all outstanding conditions will not be satisfied by completion, where you are not able to provide an unqualified COT, you should disclose this to the bank in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each bank such as RBS or Skipton will take a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Cover is typically needed where there is no proof of compliance with conditions can be supplied for works that have existed for for over a year, whether a domestic property or large commercial project. The consequential losses flow from the successful enforcement action by the local authority. In a typical conveyancing scenario the owner would be expected to pay the premium for 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 in most cases more cost effective than seeking retrospective approval and is undoubtedly much quicker. The flipside is that the risk of enforcement action still remains.
Natwest and Leeds Building Society like the majority of mortgage companies, obligations require that where lack of planning permission indemnity insurance is effected:
- your firm is required to reveal to the insurer all relevant information which you have gathered
- the lack of planning permission indemnity insurance policy should not contain conditions that you are aware would void or compromise the interests of the bank
- the lack of planning permission indemnity insurance policy needs to be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any future owner or mortgage company. If the mortgagor will not be protected by the lack of planning permission indemnity insurance policy, you must advise the borrower of this fact.
- your practice must explain to the borrower that the borrower must comply with any conditions of the lack of planning permission indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in relation to the policy
- your practice must supply a copy of the lack of planning permission indemnity insurance to the mortgagor and explain to the mortgagor why the lack of planning permission indemnity insurance policy was effected and that additional insurance might be necessary if there is additional lending against the mortgaged property
- your firm are responsible for approving the terms of the lack of planning permission policy on behalf of the mortgage company
- the minimum level of cover for the policy must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- the lack of planning permission indemnity insurance policy must be effected at no expense to the mortgage company
| Lender | Requirement |
|---|---|
| Aviva Equity Release | Full value of the property. |
| Bank of Scotland | The value of the property. |
| 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. |
| Bradford & Bingley | Amount of loan + 15% |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| Halifax | The value of the property. |
| Hampden | The open market value of the property according to the valuation report. |
| 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%. |
| Lloyds Bank Private Banking | Not less than the Facility plus 10%. |
| 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. |
| 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. |
| Reliance Bank | £1,000,000.00 |
| TSB | The value of the property |
| RBS - Direct Line One | 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 |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
Non lender-specific considerations
The extent of the terms for lack of planning permission indemnity insurance are explained in the policy document. Property lawyers should direct your non-lender client to the lack of planning permission indemnity insurance policy itself. The intention of lack of planning permission indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so you should check the document to determine that it is as it should be. The duration of this non-investment insurance agreement is in perpetuity unless otherwise stated in the lack of planning permission indemnity insurance policy. Again, please check that this is as you expected.Important aspects and benefits of lack of planning permission Contingency insurance :
Protection via such a policy is to cover the risk of third parties looking to enforce rights that can affect the use of a property. Lack of Planning Permission indemnity insurance Cover normally includes- Market value reduction due to the successful enforcement of the risks specified in the lack of planning permission indemnity insurance.
- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the lack of planning permission indemnity insurance.
- 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 demolishing 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.
- Cover for compensation incurred in any action in respect of the risks specified in the lack of planning permission indemnity insurance, as well as fees of a legal nature.
- Expenses for works (including professional fees) for the purpose of the development commenced, 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 decision.
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the lack of planning permission policy will not be valid.
Lack of Planning Permission Indemnity Insurance has limitations - Supplemental considerations
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from lack of planning permission insurance may be adequate for your client.WhenIBought
Have you only discovered missing planning permission when trying to sell or remortgage? If the work predates your purchase, consider what you were told about the missing consent and any indemnity policy arranged at the time. Visit WhenIBought's page on missing planning permission to explore the issue and tell us what happened when you bought.
The content set out above is in relation to properties in England and Wales.