Indemnity Insurance of Lack of Planning Permission Lender conveyancing requirements
Nationwide and Lloyds TSB, in common with the majority of mortgage companies, dictate their own specific instructions when it comes to lack of planning permission indemnity insurance. This page is designed to help property law solicitors on the numerous mortgage company conveyancing panel where the title to be charged incorporates lack of planning permission. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Leeds Building Society, Birmingham Midshires or Yorkshire Building Society. 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?
Being a conveyancing lawyer on a bank panel you must make appropriate searches and enquiries take all reasonable steps (including any further queries to clarify any issues which may arise) to ensure the premises 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 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 premises from being used as domestic property or that the property may be the subject of enforcement action.
If there is evidence of a breach of planning permission but in your professional judgment there is no reasonable chance of enforcement action and, following appropriate enquiries, and you are satisfied that there is a good and marketable title and are in a position to submit an unqualified COT, the bank may not require Lack of Planning Permission indemnity insurance and you may go ahead without it.
If 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 notify this to the bank in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as Nationwide or Lloyds TSB may adopt a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Indemnity Insurance is typically required where there is no verification of compliance with conditions can be produced for works that have existed for 12 months or more, whether a residential property or large commercial project. The loss arises following 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 lender.
A lack of planning permission indemnity insurance policy is ordinarily cheaper than gaining retrospective permission and is certainly much quicker. The downside is that the risk of enforcement action does not disappear.
Barclays and Virgin Money in common with many mortgage companies, requirements are that where lack of planning permission indemnity insurance is to be put on risk:
- the level of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
- the lack of planning permission indemnity insurance policy must be effected at no cost to the lender
- you is duty bound to point out 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 borrower should notify the lender of any notice or potential claim in respect of the insurance
- the lack of planning permission indemnity insurance policy must be for the benefit of the bank and, wherever possible, in favour of the mortgagor and any next registered proprietor or lender. If the borrower will not be protected by the lack of planning permission indemnity insurance policy, the borrower needs to be informed accordingly.
- your firm are responsible for approving the terms of the lack of planning permission policy on behalf of the mortgage company
- your firm must send 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 a further policy could be required if there is additional borrowing against the security of the property
- you must disclose to the insurer all relevant information which you have gathered
- the lack of planning permission indemnity insurance policy should not contain conditions that you recognise would invalidate or compromise the interests of the mortgage company
| 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. |
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| 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). |
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Britannia | Cover to the full value of the property. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Harpenden Building Society | 110% of mortgage advance |
| Holmesdale Building Society | 110% |
| 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. |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| 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. |
| Mortgage Express | Amount of loan + 15% |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| RBS- First Active | An amount equal to the value of the property. |
| Royal Bank of Scotland -Natwest One | An amount equal to the value of the property. |
| Yorkshire 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. |
Lack of Planning Permission Contingency Insurance : Reflections
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are identified in the policy paperwork. Conveyancing Practitioners should direct the borrower to the lack of planning permission indemnity insurance policy document. The intention of lack of planning permission indemnity insurance is to grant indemnity in respect of the risks specified in the policy schedule - so it is essential check the document to determine that it is correct. The continuance of this non-investment insurance agreement 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 Contingency insurance: Important features 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- 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.
- 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.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Reimbursement for compensation incurred in any proceedings regarding the risks specified in the lack of planning permission policy, including fees of a legal nature.
- Loss in market value resulting from the successful enforcement of the risks specified in the lack of planning permission insurance.
- Money paid with consent in writing from the insurance company to free the property from the risks specified in the lack of planning permission policy.
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.
Supplemental 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 answer.The content set out above covers to properties in England and Wales.