Lack of Planning Permission Indemnity Insurance Mortgage Company conveyancing requirements
Leeds Building Society and Godiva Mortgages, as with most lenders, set their own requirements when it comes to lack of planning permission indemnity insurance. The content herein aims to help residential conveyancing practitioners on the different lender approved list of panel lawyers 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, for example Coventry BS, RBS or Virgin Money. 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 mortgage company panel you must enquire (including any additional queries to clarify any issues which may arise) to ensure the premises 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 preclude 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 opinion there is no reasonable prospect of enforcement action and, following reasonable enquiries, and you are content that that the title is uncompromised and are able to issue an unqualified COT, 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 unqualified COT, you should notify this to the mortgage company in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each lender such as Leeds Building Society or Godiva Mortgages may adopt a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Insurance is typically required where there is no verification of compliance with conditions can be produced for works that have been in existence for 12 months or more, whether a domestic property or large commercial project. The consequential losses flow from the successful enforcement proceedings by the local authority. In a typical conveyancing scenario the vendor would be expected to pay the premium for 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 cheaper than applying for retrospective consent and is without question much quicker. The downside is that the risk of enforcement action still remains.
Natwest and Yorkshire Bank Home Loans like the majority of banks, requirements are that where lack of planning permission indemnity insurance is to be put on risk:
- your firm is required to reveal to the insurer all relevant information which you have gathered
- the lack of planning permission indemnity insurance policy should not contain conditions which you are aware would void or prejudice the interests of the bank
- the level of indemnity must meet the requirements for the lender (See Part II Handbook requirements )
- you must provide a duplicate of the lack of planning permission indemnity insurance to the borrower and explain to the borrower why the lack of planning permission indemnity insurance policy was effected and that additional insurance might be required if there is further lending against the security of the property
- your firm must approve the terms of the lack of planning permission policy on behalf of the bank
- your practice must 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 mortgagor should notify the bank of any notice or potential claim in respect of the policy
- the lack of planning permission indemnity insurance policy should always be in favor of the lender and, wherever possible, for the benefit of the mortgagor and any subsequent registered proprietor or bank. If the borrower will not be protected by the lack of planning permission indemnity insurance policy, you must advise the mortgagor of this fact.
- the lack of planning permission indemnity insurance policy should be effected without cost to the bank
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| April Mortgages | An amount at least equal to the mortgage advance. |
| Bank of Ireland Mortgages | The limit of indemnity must be an amount not less than the market value of the property. |
| Clydesdale Bank | Open market value of property. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Godiva Mortgages | Minimum of the value of the property. |
| Halifax Loans | 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. |
| Holmesdale Building Society | 110% |
| Intelligent Finance | 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. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| 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. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Santander | The purchase price or (if lower) 110% of the mortgage advance. |
| TSB | The value of the property |
| 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. |
General Lack of Planning Permission indemnity insurance points to consider
The extent of the terms for lack of planning permission indemnity insurance are identified in the policy document. Property lawyers should point your non-lender client to the lack of planning permission indemnity insurance policy paperwork. Lack of Planning Permission indemnity insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so you should check the document to ensure it is as it should be. The lifetime of this non-investment insurance contract is in perpetuity unless otherwise stated in the lack of planning permission indemnity insurance policy. Again, please check that this is as you expected.Lack of Planning Permission Contingency insurance: Important 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- The out of pocket expenses 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.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- 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 policy, to the extent that such costs are rendered abortive by court order.
- Market value reduction resulting from the successful enforcement of the risks specified in the lack of planning permission policy.
- Money paid with consent in writing from the insurance company to free the property from the risks specified in the lack of planning permission insurance.
- Reimbursement for compensation incurred in any proceedings concerning the risks specified in the lack of planning permission indemnity insurance, as well as legal and associated costs.
As with any insurance policy, 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 - Supplemental 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 content set out above covers to properties in England and Wales.