Indemnity Insurance of Lack of Planning Permission Mortgage Company conveyancing requirements
Barnsley BS and Lloyds TSB, as with the majority of lenders, set their own requirements when it comes to lack of planning permission indemnity insurance. The content herein aims to help property law lawyers on the various lender solicitors panel where the title for the the property to be mortgaged incorporates lack of planning permission. It is not a alternative for checking the Council of Mortgage Lenders’ handbook requirements for each mortgage company, for example Yorkshire Bank Home Loans, Natwest or Bank of Scotland. The content 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 solicitor on a bank panel you must conduct due diligence as to (including any additional investigations to clarify any issues which may arise) to ensure the residence 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 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 property from being used 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 judgment there is no reasonable chance of enforcement action and, following reasonable enquiries, and you are content that that the title is uncompromised and are able to issue an unqualified certificate of title, the lender may not require Lack of Planning Permission indemnity insurance and you may go ahead without it.
Where 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 disclose this to the lender in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each bank such as Barnsley BS or Lloyds TSB will take a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Cover is typically needed where there is no evidence of compliance with conditions can be provided for works that have existed for a year or more, whether a residential residence or large commercial project. The consequential losses flow from the successful enforcement action 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 purchaser’s name as well as the mortgage company.
A lack of planning permission indemnity insurance policy is in most cases cheaper than obtaining retrospective approval and is without question significantly quicker. The downside is that the risk of enforcement action does not disappear.
Virgin Money and Birmingham Midshires in common with many banks, requirements are that where lack of planning permission indemnity insurance is to be put on risk:
- your firm must approve the terms of the lack of planning permission policy on behalf of the bank
- your firm must explain to the mortgagor that the borrower must 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 relation to the policy
- the minimum level of cover for the policy must satisfy the requirements for the bank (See Part II Handbook requirements )
- you must supply 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 additional insurance could be necessary if there is additional borrowing against the mortgaged property
- the lack of planning permission indemnity insurance policy must be placed on risk at no cost to the lender
- you is required to disclose to the insurer all relevant information which you have obtained
- the lack of planning permission indemnity insurance policy must not incorporate conditions which you recognise would invalidate or compromise the interests of the lender
- the lack of planning permission indemnity insurance policy needs to be for the benefit of the lender and, if possible, for the benefit of the borrower and any subsequent registered proprietor or mortgage company. Where the borrower will not be protected by the lack of planning permission indemnity insurance policy, the mortgagor must be advised accordingly.
| Lender | Requirement |
|---|---|
| Accord Mortgages | |
| Bank of Ireland | |
| Clydesdale Bank | |
| Coventry Building Society | |
| DB UK Bank | |
| Dudley Building Society | |
| Godiva Mortgages | |
| Handelsbanken | |
| Investec | |
| Kensington Mortgage | |
| Legal & General Home Finance | |
| NRAM Ltd | |
| National Counties Building Society | |
| Parity Trust | |
| Pepper Money | |
| RBS - Direct Line | |
| RBS - Direct Line One | |
| Vida Homeloans | |
| Yorkshire Building Society |
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 paperwork. Conveyancing Practitioners are obliged to point the borrower to the lack of planning permission indemnity insurance policy paperwork. Lack of Planning Permission indemnity insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to ensure it is in order. The continuance 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.Important characteristics and benefits of lack of planning permission indemnity insurance :
The policy 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 Policies are likely to cover the following- Diminution in value due to the successful enforcement of the risks specified in the lack of planning permission policy.
- 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.
- Cover for compensation incurred in any action concerning the risks specified in the lack of planning permission insurance, as well as legal and associated costs.
- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development begun, or contracted for, prior to proceedings for the enforcement of the risks specified in the lack of planning permission policy, to the extent that such costs are rendered abortive by court decision.
- 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 insurance.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurer
Due diligence should extend to checking that the answers on the application form are accurate. Regardless of how remote a claim on the bank insurance policy might be you can certain that the insurer will check the details on any proposal form thoroughly prior to any claim being admitted.
Other considerations for lack of planning permission indemnity insurance
There may be consequences arising from the enforcement of the risks identified in the lack of planning permission insurance which are not adequately covered by financial compensation.The above information is in relation to properties in England and Wales.