Bank conveyancing panel requirements re Lack of Planning Permission Indemnity Insurance
HSBC and Coventry BS, like the majority of lenders, dictate their own requirements when it comes to lack of planning permission indemnity insurance. The purpose of this page to assist residential conveyancing solicitors on the various lender solicitors panel where the title to be charged contains lack of planning permission. It is not a substitute for checking the CML handbook requirements for each bank, be it Chelsea BS, Halifax or Accord. 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?
In your capacity as a property lawyer on a mortgage company panel you must investigate (including any further enquiries to clarify any issues which may arise) to ensure the premises has the appropriate 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 restrict the premises from being utilised 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 opinion there is no reasonable likelihood of enforcement action and, following reasonable enquiries, and you are assured that that the title is uncompromised and can provide an unconditional certificate of title, the bank may 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 unconditional COT, you should reveal this to the mortgage company in accordance with 2.3. of the UK Finance Lenders’ Handbook P2. Each mortgage company such as HSBC or Coventry BS will take a different approach.
About Lack of Planning Permission Indemnity Insurance
Lack of Planning Permission Indemnity Insurance is typically needed where there is no proof of compliance with conditions can be provided for works that have existed for 12 months or more, whether a domestic residence or large commercial project. The consequential losses flow from the 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 ordinarily more cost effective than seeking retrospective consent and is certainly much quicker. The downside is that the risk of enforcement action does not disappear.
Skipton and RBS like many lenders, requirements are that where lack of planning permission indemnity insurance is effected:
- the lack of planning permission indemnity insurance policy must be for the benefit of the mortgage company and, if possible, for the benefit of the borrower and any future registered proprietor or mortgagee. If the mortgagor 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 must be effected at no charge to the mortgage company
- the lack of planning permission indemnity insurance policy should not contain conditions that you know would invalidate or compromise the interests of the mortgage company
- you is duty bound to spell out to the borrower that the borrower is obliged to adhere to any conditions of the lack of planning permission indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the insurance
- your practice are responsible for approving the terms of the lack of planning permission policy on behalf of the bank
- your firm 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 a further policy may be mandatory if there is supplemental lending against the security of the property
- your firm must disclose to the insurer all relevant information which you have acquired
- the level of indemnity must meet the requirements for the mortgage company (See Part II Handbook requirements )
| Lender | Requirement |
|---|---|
| Adam & Company | The open market value of the property according to the valuation report. |
| Bank of China | Cover to full value of the property or the Mortgage Advance, whichever is the higher. |
| Bank of Ireland | The limit of indemnity must be an amount not less than the market value of the property. |
| Bank of Scotland Private | [This lender has not published an answer to this question. Please contact the lender.]
|
| Bradford & Bingley | Amount of loan + 15% |
| Danske Bank | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Harpenden Building Society | 110% of mortgage advance |
| Investec | The open market value of the property according to the valuation report. |
| Landmark | 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. |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Paragon Residential | An amount at least equal to the stated value of the Property. |
| Perenna | The higher of the purchase price or valuation. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Sainsbury's Bank | An amount equal to the higher of the value of the property or the purchase price. |
| Scottish Widows | The value of the property. |
| 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. |
| RBS - Direct Line One | An amount equal to the value of the property. |
Lack of Planning Permission Contingency Insurance : Reflections
The extent of the terms for lack of planning permission indemnity insurance are explained in the policy document. Property lawyers 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 grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to ensure it is in order. The lifetime 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.Important characteristics and benefits of lack of planning permission indemnity insurance :
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 Cover normally includes- 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.
- 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 commenced, before the commencement of 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 decision.
- Diminution in value resulting from the successful enforcement of the risks specified in the lack of planning permission indemnity insurance.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Money paid with the written consent of the insurance company to liberate the property from the risks specified in the lack of planning permission insurance.
Don't forget to consider what is excluded from the lack of planning permission insurance e.g. does the policy cover any residence 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 content set out above is in relation to properties in England and Wales.