Bank conveyancing panel requirements re Lack of Planning Permission Indemnity Insurance
Yorkshire Building Society and Barnsley BS, in common with most banks, have their own specific instructions when it comes to lack of planning permission indemnity insurance. This page sets out to enlighten conveyancing practitioners on the different lender solicitors panel where the title to be charged includes lack of planning permission. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, be it HSBC, Barclays or Skipton. 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?
As a solicitor on a mortgage company panel you must investigate (including any supplemental investigations to clarify any issues which may arise) to ensure the residence has the correct 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 property from being utilised as residential 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 opinion there is no reasonable likelihood of enforcement action and, following appropriate enquiries, and you are content that that the title is uncompromised and are in a position to submit an unqualified certificate of title, the mortgage company 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 unconditional certificate of title, you should disclose this to the mortgage company in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each bank such as Yorkshire Building Society or Barnsley BS may adopt a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Indemnity Insurance is typically needed where there is no verification of compliance with conditions can be provided for works that have been in existence for for over a year, whether a domestic premises or large commercial project. The loss arises following successful enforcement action 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 buyer’s name as well as the mortgage company.
A lack of planning permission indemnity insurance policy is normally cheaper than gaining retrospective approval and is undoubtedly significantly quicker. The downside is that the risk of enforcement action still remains.
Leeds Building Society and Birmingham Midshires like many lenders, instructions are such that where lack of planning permission indemnity insurance is to be put on risk:
- your firm must supply a copy 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 could be required if there is supplemental borrowing against the security of the property
- the minimum level of cover for the policy must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- your firm is required to reveal to the insurer all relevant information which you have acquired
- you must approve the terms of the lack of planning permission policy on behalf of the lender
- the lack of planning permission indemnity insurance policy should not incorporate terms which you know would void or compromise the interests of the mortgage company
- the lack of planning permission indemnity insurance policy must be placed on risk without cost to the bank
- the lack of planning permission indemnity insurance policy should always be in favor of the bank and, wherever possible, for the benefit of the mortgagor and any subsequent owner or bank. Where the mortgagor will not be protected by the lack of planning permission indemnity insurance policy, the mortgagor needs to be informed accordingly.
- your practice is duty bound to point out to the mortgagor that the borrower will need to adhere to any conditions of the lack of planning permission indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the policy
| Lender | Requirement |
|---|---|
| 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Barnsley 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. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Coutts & Co | The open market value of the property according to the valuation report. |
| Habito | Higher of purchase price or valuation |
| JPMorgan | 110% of principal sum. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| Lloyds | The value of the property. |
| Lloyds TSB Scotland | The value of the property |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Masthaven Bank | 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. |
| 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. |
| Perenna | The higher of the purchase price or valuation. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| 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. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| RBS (One Account) | An amount equal to the value of the property. |
| Whistletree | 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. |
Non lender-specific considerations
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are set out in the policy document. Conveyancing solicitors are obliged to point your non-lender client to the lack of planning permission indemnity insurance policy document. 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 is essential check the document to ensure it is in order. The lifetime of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Lack of Planning Permission Contingency insurance: Significant aspects and benefits:
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the lack of planning permission indemnity insurance schedule. Lack of Planning Permission indemnity insurance Cover normally includes- All sums paid with the written consent of the insurance company to free the land from the risks specified in the lack of planning permission policy.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Diminution in value resulting from the successful enforcement of the risks specified in the lack of planning permission policy.
- Liability for damages or compensation incurred in any proceedings concerning the risks specified in the lack of planning permission insurance, including legal and associated costs.
- 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.
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, 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 decision.
Due diligence should extend to checking that the answers on the application form are accurate. However remote the likelihood of a claim on the mortgage company insurance policy might be you can rest assured that the insurer will check the details on any proposal form very carefully prior to any claim being paid out.
Lack of Planning Permission Indemnity Insurance has limitations - Further 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.The above information is in relation to properties in England and Wales.