Indemnity Insurance of Lack of Planning Permission Mortgage Company conveyancing obligations
Birmingham Midshires and Leeds Building Society, in common with many lenders, have their own requirements when it comes to lack of planning permission indemnity insurance. The purpose of this page to assist conveyancing firms on the different bank solicitors panel where the title to be charged contains lack of planning permission. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Godiva Mortgages, RBS or Bank of Scotland. The content 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 bank panel you must make appropriate searches and enquiries take all reasonable steps (including any further investigations to clarify any issues which may arise) to ensure the property has the appropriate 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 prohibit the premises from being utilised as residential property or that the property may be the subject of enforcement proceedings.
If there is evidence of such a breach or matter but in your professional judgment there is no reasonable likelihood of enforcement action and, following appropriate enquiries, and you are assured that that the title is uncompromised and are able to issue an unconditional certificate of title, the mortgage company may not insist on 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 COT, you should notify this to the mortgage company in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each bank such as Birmingham Midshires or Leeds Building Society may take a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Indemnity Insurance is typically needed where there is no documentary evidence of compliance with conditions can be provided for works that have been in existence for 12 months or more, whether a residential residence or large commercial project. The consequential losses flow from the successful enforcement proceedings by the local authority. In a typical conveyancing scenario the seller 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 usually less expensive than obtaining retrospective consent and is without question significantly quicker. The flipside is that the risk of enforcement action does not disappear.
Nationwide and Accord like many lenders, obligations require that where lack of planning permission indemnity insurance is to be put on risk:
- the lack of planning permission indemnity insurance policy should be effected without expense to the bank
- you 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 not contain conditions that you are aware would invalidate or prejudice the interests of the bank
- the lack of planning permission indemnity insurance policy should always be in favor of the lender and, wherever possible, for the benefit of the borrower and any subsequent registered proprietor or lender. Where the borrower will not be covered by the lack of planning permission indemnity insurance policy, the borrower must be advised accordingly.
- your practice must supply a duplicate 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 a further policy could be mandatory if there is supplemental lending against the mortgaged property
- your practice is required to reveal to the insurer all relevant information which you have obtained
- the limit of indemnity must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- your firm is duty bound to point out to the borrower that the borrower must adhere to any conditions of the lack of planning permission indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the policy
| Lender | Requirement |
|---|---|
| April Mortgages | An amount at least equal to the mortgage advance. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| 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. |
| 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. |
| Holmesdale Building Society | 110% |
| ITL Mortgages | Minimum of the value of the property. |
| Lloyds | The value of the property. |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| Molo Finance 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 mortgages. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| Mortgage Express | Amount of loan + 15% |
| Mortgage Express (No 2) | [This lender has not published an answer to this question. Please contact the lender.]
|
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Scottish Widows | The value of the property. |
| St James Place | 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. |
| RBS - Direct Line | An amount equal to the value of the property. |
| Whistletree | The value of the property |
General Lack of Planning Permission indemnity insurance points to consider
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are shown 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 afford indemnity in respect of the risks set out in the policy schedule - so you should check the document to determine that it is in order. The lifetime 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.Significant features 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 Cover normally includes- Loss in market value due to the successful enforcement of the risks specified in the lack of planning permission insurance.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Expenses for 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 planning permission indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Money paid with consent in writing from the insurance company to free the land from the risks specified in the lack of planning permission policy.
- Reimbursement for compensation incurred in any proceedings concerning the risks specified in the lack of planning permission insurance, including legal and associated costs.
- 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.
Always check what is not included in the lack of planning permission indemnity insurance e.g. does the policy cover any residence that has been altered within the 12 months prior to the policy being put on risk? Are legal costs covered?
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.