Indemnity Insurance of Outstanding Leasehold Interest Bank conveyancing obligations
Leeds Building Society and Santander, like most mortgage companies, dictate their own specific instructions when it comes to outstanding leasehold interest indemnity insurance. The content herein aims to help property law solicitors on the numerous mortgage company conveyancing panel where the title to be charged contains outstanding leasehold interest. It is not a alternative for checking the CML handbook requirements for each bank, for example Coventry BS, Lloyds TSB or HSBC. The information on this page Is not to be read as outstanding leasehold interest indemnity insurance advice.
Need help with outstanding leasehold interest indemnity insurance from your lender?
Birmingham Midshires and Barclays like most mortgage companies, instructions are such that where outstanding leasehold interest indemnity insurance is effected:
- you are responsible for approving the terms of the outstanding leasehold interest policy on behalf of the mortgage company
- the outstanding leasehold interest indemnity insurance policy must not contain conditions that you are aware would void or compromise the interests of the mortgage company
- you must supply a copy of the outstanding leasehold interest indemnity insurance to the mortgagor and explain to the borrower why the outstanding leasehold interest indemnity insurance policy was effected and that additional insurance could be necessary if there is further borrowing against the mortgaged property
- the outstanding leasehold interest indemnity insurance policy must be for the benefit of the lender and, wherever possible, for the benefit of the borrower and any future registered proprietor or mortgagee. If the mortgagor will not be covered by the outstanding leasehold interest indemnity insurance policy, you must advise the borrower of this fact.
- the minimum level of cover for the policy must satisfy the requirements for the lender (See Part II Handbook requirements )
- you is required to reveal to the insurer all relevant information which you have gathered
- you is duty bound to explain to the borrower that the borrower will need to comply with any conditions of the outstanding leasehold interest indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the policy
- the outstanding leasehold interest indemnity insurance policy should be placed on risk at no expense to the bank
| Lender | Requirement |
|---|---|
| Adam & Company International | The open market value of the property according to the valuation report. |
| 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). |
| Aviva Equity Release | Full value of the property. |
| Bank of Scotland | Not less than mortgage advance plus 10% |
| Capital Home Loans | An amount which is at least equal to the value or the purchase price of the property, whichever is the higher |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| Foundation Home loans | An amount equal to 110% of the valuation or purchase price - whichever is the greater. |
| Halifax Loans | An amount at least equal to the mortgage advance. |
| Harpenden Building Society | 110% of 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. |
| 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. |
| LendInvest | An amount at least equal to the valuation of the property. |
| Lloyds | The value of the property. |
| Magellan Homeloans | At least equal to the value of the property |
| Metro Bank | The open market value of the property according to the valuation report. |
| Monmouthshire Building Society | The higher of the purchase price or valuation. For remortgages, the value of the advance. |
| National Westminster Bank | An amount equal to the value of the property. |
| The Mortgage Works | The full purchase price/value of the property whichever is higher |
| RBS - Direct Line | An amount equal to the value of the property. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
Non lender-specific considerations
The full terms, conditions and exclusions for outstanding leasehold interest indemnity insurance are explained in the policy paperwork. Conveyancing solicitors should point the borrower to the outstanding leasehold interest indemnity insurance policy paperwork. The intention of outstanding leasehold interest indemnity insurance is to afford indemnity in respect of the risks set out in the policy schedule - so it’s important to check any draft to determine that it is as it should be. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.Outstanding Leasehold Interest indemnity insurance: Significant 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. Outstanding Leasehold Interest indemnity insurance Policies should be checked for the following- Cover for compensation incurred in any proceedings concerning the risks specified in the outstanding leasehold interest insurance, as well as legal and associated costs.
- Money paid with the written consent of the insurance company to free the land from the risks specified in the outstanding leasehold interest indemnity insurance.
- Market value reduction resulting from the successful enforcement of the risks specified in the outstanding leasehold interest insurance.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- 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 outstanding leasehold interest indemnity insurance, to the extent that such costs are rendered abortive by court decision.
- 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.
Don't forget to consider what is not included in the outstanding leasehold interest policy e.g. does the policy cover any property that has been altered within the year prior to the commencement of the policy? Does it cover legal costs?
Additional considerations for outstanding leasehold interest indemnity insurance
Outstanding Leasehold Interest Indemnity insurance isn’t a solution to all of the relevant problems. Information contained within this webpage is for general information for conveyancers and solicitors in England and Wales on the the mortgage company conveyancing panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the mortgage company indemnity insurance. Whilst we endeavour to keep the information up to date and correct we do not make any representation or warranties of any kind about its completeness, accuracy, reliability or suitability. Any reliance you place on the information is strictly at your own risk. Lexsure will not be liable for any direct or indirect loss or damage arising out of or in connection with the use of this information.
An important exclusion applying to most outstanding leasehold interest Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The above information covers to properties in England and Wales.