Indemnity Insurance of Lack of Planning Permission Bank conveyancing requirements
RBS and HSBC, as with many lenders, have their own specific instructions when it comes to lack of planning permission indemnity insurance. The content herein aims to help property law practitioners on the numerous lender approved list of panel lawyers where the title to be charged includes lack of planning permission. It is not a alternative for checking the CML handbook requirements for each mortgage company, for example Halifax, Barclays or Virgin Money. 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?
Being a solicitor on a mortgage company panel you must make appropriate searches and enquiries take all reasonable steps (including any additional investigations to clarify any issues which may arise) to ensure the premises has the benefit of any necessary planning consents (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 restrict the premises from being utilised as domestic 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 satisfied that the title is good and marketable and are able to issue an unqualified certificate of title, 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 unqualified certificate of title, you should report this to the bank in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each lender such as RBS or HSBC may adopt a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Insurance is typically required where there is no evidence of compliance with conditions can be provided for works that have been in existence for for over twelve months, whether a domestic premises or large commercial project. The loss arises following successful enforcement proceedings by the local authority. In a typical conveyancing scenario the seller would be expected to cover the costs of the Lack of Planning Permission Indemnity Insurance, which would be taken out in the purchaser’s name as well as the lender.
A lack of planning permission indemnity insurance policy is in most cases cheaper than applying for retrospective consent and is undoubtedly much quicker. The downside is that the risk of enforcement action does not disappear.
Birmingham Midshires and Lloyds TSB as with the majority of banks, obligations require that where lack of planning permission indemnity insurance is effected:
- 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 must be effected at no charge to the bank
- the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the lack of planning permission indemnity insurance policy must not contain terms which you know would invalidate or prejudice the interests of the bank
- your practice must provide a duplicate 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 mandatory if there is additional lending against the mortgaged property
- you must reveal to the insurer all relevant information which you have obtained
- the lack of planning permission indemnity insurance policy needs to be in favor of the mortgage company and, if possible, in favour of the borrower and any subsequent owner or mortgagee. If the mortgagor will not be protected by the lack of planning permission indemnity insurance policy, the borrower needs to be informed accordingly.
- your practice is duty bound to explain to the mortgagor that the borrower will need to comply with 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 relation to the insurance
| Lender | Requirement |
|---|---|
| April Mortgages | An amount at least equal to the mortgage advance. |
| Aviva Equity Release | Full value of the property. |
| First Direct | The value of the insurance must be for at least the full value of the property |
| Fleet Mortgages | An amount at least equal to the valuation of the property. |
| Furness Building Society | Property valuation or purchase price, whichever the greater. |
| Gen H | An amount equal to the value of the property unless specifically agreed in writing otherwise. |
| Godiva Mortgages | Minimum of the value of the property. |
| Hinckley and Rugby | The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest. |
| Kent Reliance | An amount at least equal to 110% of the mortgage valuation. |
| LendInvest | An amount at least equal to the valuation of the property. |
| National Westminster Bank | An amount equal to the value of the property. |
| Nationwide Building Society | Purchase Price (valuation if price is at a discount). Contact Issuing Office for advice on a remortgage |
| 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). |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| 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. |
Lack of Planning Permission Contingency Insurance : Reflections
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are shown in the policy document. Conveyancing Practitioners are obliged to direct the borrower 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 you should check the document to determine that it is in order. The lifetime of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. It is well worth checking that the time frame is correct.Lack of Planning Permission indemnity insurance: Significant aspects and benefits:
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 Policies should be checked for the following- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Cover for compensation incurred in any action concerning the risks specified in the lack of planning permission policy, including fees of a legal nature.
- The cost 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.
- Expenses for works (including architects’ and surveyors’ 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 decision.
- All sums paid with consent in writing from the insurance company to free the land from the risks specified in the lack of planning permission indemnity insurance.
- Market value reduction resulting from the successful enforcement of the risks specified in the lack of planning permission indemnity insurance.
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 - Further considerations
Lack of Planning Permission Indemnity insurance isn’t a solution to all of the relevant problems.The content set out above is in relation to properties in England and Wales.