Lender conveyancing panel conditions re Absentee Landlord Indemnity Insurance
Leeds Building Society and Barnsley BS, like the majority of mortgage companies, dictate their own specific instructions when it comes to absentee landlord indemnity insurance. The purpose of this page to assist conveyancing solicitors on the different lender conveyancing panel where the title for the the property to be mortgaged incorporates absentee landlord. Solicitors should still check the CML handbook requirements for each lender, whether it be Virgin Money, Bank of Scotland or Barclays. The information on this page Is not to be read as absentee landlord indemnity insurance advice.
Need help with absentee landlord indemnity insurance from your lender?
Being a conveyancing practitioner on a bank panel you must report to the bank (see Section two of the UK Finance Lenders’ Handbook) if it becomes apparent that the landlord is either missing or insolvent. If the bank are to lend, they may demand missing landlord indemnity insurance. Banks’ approach is changing however and an increased number of banks have changed their requirements on the minimum lease term before they are prepared to lend. LENDER monitor has identified since 2008 a changing attitude towards in absentee landlord insurance. A number of lendersbanks in the past stated that, they would have lent on an absentee landlord, whereas they will no longer do so. See 5.14.15 to see if the lender accept indemnity insurance if the landlord is absent or insolvent. Examples of such requirements as follows:
| Lender | Requirement |
|---|---|
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| HSBC UK Bank | Yes, Indemnity insurance is acceptable |
| Halifax | Yes, subject to the requirements of section 9 being met. |
| Molo Finance Buy to Let | Yes, provided that you can give an unqualified certificate of title. |
| Mortgage Agency Services | Yes |
| Scottish Widows | Yes. |
| Tipton Coseley Building Society | No, we do not lend in these circumstances. |
About Absentee Landlord Indemnity Insurance
Many solicitor throughout the country regularly rely on absentee landlord insurance to help move the conveyancing process when the freeholder or landlord of land or premises is insolvent, absent or where the company is no longer in existence. This results in an inability to pay ground rent and seek permission to lease assignments and alterations to the premises. The potential loss is that the landlord may request ground rent or seek forfeiture of the lease alleging breach of covenant should they subsequently re-appear.
Yorkshire Bank Home Loans and Coventry BS like many banks, obligations require that where absentee landlord indemnity insurance is to be taken out:
- your practice must spell out to the borrower that the borrower will need to adhere to any conditions of the absentee landlord indemnity insurance policy and that the borrower should notify the lender of any notice or potential claim in respect of the policy
- your practice must reveal to the insurer all relevant information which you have acquired
- the absentee landlord indemnity insurance policy must be effected at no charge to the mortgage company
- the absentee landlord indemnity insurance policy should always be in favor of the bank and, wherever possible, in favour of the mortgagor and any subsequent registered proprietor or mortgagee. If the borrower will not be protected by the absentee landlord indemnity insurance policy, you must advise the mortgagor of this fact.
- you must provide a copy of the absentee landlord indemnity insurance to the mortgagor and explain to the mortgagor why the absentee landlord indemnity insurance policy was effected and that a further policy might be mandatory if there is additional borrowing against the mortgaged property
- the absentee landlord indemnity insurance policy must not incorporate terms which you know would void or prejudice the interests of the bank
- your practice must approve the terms of the absentee landlord policy on behalf of the lender
- the limit of indemnity must meet the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Coutts Finance | The open market value of the property according to the valuation report. |
| DB UK Bank | An amount at least equal to the mortgage advance or credit limit, whichever the higher. The policy must be assignable |
| GE Money | GE Money Home Lending has withdrawn from the UK mortgage market. |
| Godiva Mortgages | Minimum of the value of the property. |
| HSBC UK Bank | The value of the insurance must be for at least the full value of the property |
| Halifax | The value of the property. |
| Hinckley and Rugby | The policy must be for our benefit and for no less than the amount lent to the borrower, including retentions, stage payments and interest. |
| Keystone Property Finance | An amount equal to 110% of the valuation or purchase price - whichever is the greater |
| M&S Bank | the value of the insurance must be for at least the full value of the property |
| 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. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Mortgage Express | Amount of loan + 15% |
| Nedbank | You are to refer to us for specific instructions on any matter involving indemnity insurance. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Platform | 110% of principal sum. |
| Scottish Widows | The value of the property. |
| Royal Bank of Scotland | An amount equal to the value of the property. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Together Personal Finance | Minimum of £2,000,000.00 per claim. |
Non lender-specific considerations
The full terms, conditions and exclusions for absentee landlord indemnity insurance are identified in the policy paperwork. Property lawyers should point your non-lender client to the absentee landlord indemnity insurance policy itself. Absentee Landlord indemnity insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it is essential check any draft to ensure it is correct. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the absentee landlord indemnity insurance policy. Adequacy in this regard should be checked.Important aspects and benefits of absentee landlord indemnity insurance :
This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Absentee Landlord indemnity insurance Policies are likely to cover the following- Diminution in value resulting from the successful enforcement of the risks specified in the absentee landlord insurance.
- All sums paid with the written consent of the insurance company to liberate the land from the risks specified in the absentee landlord insurance.
- 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.
- Reimbursement for compensation incurred in any proceedings concerning the risks specified in the absentee landlord insurance, including incurred costs and expenses.
- Expenses for works (including professional fees) for the purpose of the development begun, or contracted for, before the commencement of proceedings for the enforcement of the risks specified in the absentee landlord policy, to the extent that such costs are rendered abortive by court decision.
- All ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
You also need to be sure that the answers on the application form are accurate. Regardless of how remote a claim on the mortgage company insurance policy might be you can certain that the insurer will check the details on any proposal form very carefully prior to any claim being paid out.
Absentee Landlord Indemnity Insurance has limitations - Other considerations
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from absentee landlord insurance may be adequate for your client.The above information covers to properties in England and Wales.