Lack of Planning Permission Indemnity Insurance Mortgage Company conveyancing requirements
Barclays and HSBC, as with most banks, have their own specific instructions when it comes to lack of planning permission indemnity insurance. The content herein aims to help domestic conveyancing lawyers on the different lender approved list of panel lawyers 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 Skipton, Virgin Money or Barnsley BS. 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 lender panel you must investigate (including any additional investigations to clarify any issues which may arise) to ensure the residence has the benefit of any necessary planning permissions (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 restrict the premises from being used as residential property or that the property may be the subject of enforcement action.
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 that the title is uncompromised and are in a position to submit an unconditional certificate of title, the lender 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 bank in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each lender such as Barclays or HSBC may take a different stance.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Cover is typically required where there is no documentary evidence 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 consequential losses flow from the 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 mortgage company.
A lack of planning permission indemnity insurance policy is normally more cost effective than gaining retrospective permission and is without question significantly quicker. The flipside is that the risk of enforcement action still remains.
Nationwide and Lloyds TSB as with many mortgage companies, obligations require that where lack of planning permission indemnity insurance is effected:
- the lack of planning permission indemnity insurance policy should not incorporate terms that you know would invalidate or prejudice the interests of the bank
- your practice are responsible for approving the terms of the lack of planning permission policy on behalf of the mortgage company
- the limit of indemnity must satisfy the requirements for the lender (See Part II Handbook requirements )
- your practice is duty bound to spell out to the borrower 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 lender of any notice or potential claim in relation to the insurance
- you must provide a duplicate of the lack of planning permission indemnity insurance to the borrower and explain to the mortgagor why the lack of planning permission indemnity insurance policy was effected and that additional insurance may be required if there is supplemental borrowing against the security of the property
- the lack of planning permission indemnity insurance policy must be for the benefit of the mortgage company and, wherever possible, for the benefit of the borrower and any future registered proprietor or mortgage company. If the borrower will not be protected by the lack of planning permission indemnity insurance policy, you must advise the borrower of this fact.
- the lack of planning permission indemnity insurance policy should be placed on risk at no charge to the lender
- your practice is required to reveal to the insurer all relevant information which you have obtained
| Lender | Requirement |
|---|---|
| Accord Mortgages | 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. |
| Adam & Company International | The open market value of the property according to the valuation report. |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Barclays plc | Higher of purchase price or valuation |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| Harpenden Building Society | 110% of mortgage advance |
| Holmesdale Building Society | 110% |
| Legal & General Home Finance | The policy should be for the full market value of the property and indexed linked. The policy must be for our benefit, and for the benefit of the borrower where available. The policy must benefit all successors and assigns. |
| Lloyds | The value of the property. |
| Metro Bank | The open market value of the property according to the valuation report. |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| New Street Mortgages | Must be for a minimum of 110% of the purchase price or valuation whichever is the greatest. |
| Perenna | The higher of the purchase price or valuation. |
| Precise Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
| Whistletree | The value of the property |
| Yorkshire Bank | Open market value of property. |
Lack of Planning Permission Contingency Insurance : Reflections
The full terms, conditions and exclusions for lack of planning permission indemnity insurance are shown in the policy paperwork. Conveyancing solicitors 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 provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the schedule to ensure it is correct. The continuance of this non-investment insurance agreement 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:
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 Policies should be checked for the following- Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the lack of planning permission insurance, 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.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- 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.
- Liability for damages or compensation incurred in any action concerning the risks specified in the lack of planning permission policy, including legal and associated costs.
- 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.
You also need to be sure that the answers on the application form are correct. Regardless of how remote a claim on the lender insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly before any claim is met.
Lack of Planning Permission Indemnity Insurance has limitations - Other considerations
Lack of Planning Permission insurance may satisfy lenders such as Halifax or Birmingham Midshires and prevent clients from from suffering financially but it cannot compensate for the stress and inconvenience the emotional suffering - after all the value of a home cannot always be measured in cash in the eyes of the owner.The above information covers to properties in England and Wales.