Lender conveyancing panel requirements re Lack of Planning Permission Indemnity Insurance
Halifax and Skipton, as with most banks, dictate 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 mortgage company solicitors panel where the title for the the property to be mortgaged includes lack of planning permission. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Barnsley BS, Coventry BS or Santander. 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?
In your capacity as a solicitor on a bank 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 preclude the premises from being used 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 assured that there is a good and marketable title and can provide an unconditional COT, the mortgage company will not insist on 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 certificate of title, you should disclose this to the mortgage company in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each mortgage company such as Halifax or Skipton will 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 supplied 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 owner 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 bank.
A lack of planning permission indemnity insurance policy is ordinarily more cost effective than gaining retrospective approval and is without question significantly quicker. The flipside is that the risk of enforcement action does not disappear.
RBS and Birmingham Midshires like the majority of mortgage companies, requirements are that where lack of planning permission indemnity insurance is to be put on risk:
- the lack of planning permission indemnity insurance policy must be for the benefit of the lender and, wherever possible, in favour of the mortgagor and any next owner or bank. Where the borrower will not be protected by the lack of planning permission indemnity insurance policy, you must advise the borrower of this fact.
- your practice is duty bound to explain to the borrower that the borrower must adhere to any conditions of the lack of planning permission indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the policy
- your practice must approve the terms of the lack of planning permission policy on behalf of the mortgage company
- your practice is obliged to disclose to the insurer all relevant information which you have acquired
- the minimum level of cover for the policy must satisfy the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the lack of planning permission indemnity insurance policy should not contain terms that you are aware would void or prejudice the interests of the lender
- the lack of planning permission indemnity insurance policy must be placed on risk without cost to the lender
- your firm must send 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 additional insurance could be required if there is supplemental lending against the mortgaged property
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Barclays plc | Higher of purchase price or valuation |
| Bradford & Bingley | Amount of loan + 15% |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Habito | Higher of purchase price or valuation |
| Halifax | An amount at least equal to the mortgage advance. |
| Hodge | 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. |
| Landbay Partners | An amount equal to 100% of the property valuation or purchase price (whichever is greater) plus 10%. |
| MPowered Mortgages | Either the minimum reinstatement value or where there is no valuation the market value/purchase price figure (whichever is higher). |
| 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. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Parity Trust | An amount equal to at least 110% of the mortgage advance |
| Pepper Money | An amount equal to at least 110% of 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 and also the borrower(s). |
| 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). |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| Yorkshire Bank | Open market value of property. |
Non lender-specific considerations
The extent of the terms for lack of planning permission indemnity insurance are set out in the policy paperwork. Conveyancing solicitors are obliged to point the borrower 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 specified in the policy schedule - so it’s important to check the document to determine that it is as it should be. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the lack of planning permission indemnity insurance policy. Adequacy in this regard should be checked.Important 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 Policies are likely to cover the following- Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the lack of planning permission indemnity insurance, as well as solicitors charges.
- 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.
- The cost of works (including professional 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.
- Market value reduction due to the successful enforcement of 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 insurer
- All sums 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.
Don't forget to check what is excluded from the lack of planning permission indemnity insurance e.g. does the policy cover any property that has been altered within the year prior to the commencement of the policy? Does it cover legal costs?
Additional considerations for lack of planning permission indemnity insurance
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.The above information is in relation to properties in England and Wales.