Indemnity Insurance of Contingent Buildings Lender conveyancing requirements

Chelsea BS and Natwest, as with the majority of banks, set their own requirements when it comes to contingent buildings indemnity insurance. This page is designed to help residential conveyancing firms on the numerous lender approved list of panel lawyers where the title to be charged contains contingent buildings. It is not a alternative for checking the CML handbook requirements for each bank, for example RBS, Skipton or Accord. The content on this page is not focused on contingent buildings indemnity insurance requirements.

Need help with contingent buildings indemnity insurance from your lender?

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Santander and Barclays in common with most lenders, requirements are that where contingent buildings indemnity insurance is to be put on risk:

• the limit of indemnity must meet the requirements for the lender (See Part II Handbook requirements )
• your practice must approve the terms of the contingent buildings policy on behalf of the mortgage company
• your firm must explain to the mortgagor that the borrower must comply with any conditions of the contingent buildings indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in respect of the insurance
• the contingent buildings indemnity insurance policy should not contain conditions which you know would void or prejudice the interests of the lender
• the contingent buildings indemnity insurance policy should always be for the benefit of the mortgage company and, wherever possible, in favour of the borrower and any future owner or mortgage company. Where the mortgagor will not be covered by the contingent buildings indemnity insurance policy, the mortgagor should be informed accordingly.
• you must provide a copy of the contingent buildings indemnity insurance to the mortgagor and explain to the mortgagor why the contingent buildings indemnity insurance policy was effected and that additional insurance may be mandatory if there is additional borrowing against the security of the property
• your practice is obliged to disclose to the insurer all relevant information which you have acquired
• the contingent buildings indemnity insurance policy should be effected without charge to the bank

Regarding the extent of cover for the contingent buildings indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Section 9.2 of the Part 2 requirements for mortgage companies:

Non lender-specific considerations

The extent of the terms for contingent buildings indemnity insurance are set out in the policy document. Property lawyers are obliged to point your non-lender client to the contingent buildings indemnity insurance policy document. Contingent Buildings Contingency insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to determine that it is correct. The duration of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.

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Contingent Buildings Contingency insurance: Significant aspects and benefits:

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. Contingent Buildings indemnity insurance Cover normally includes

• Market value reduction resulting from the successful enforcement of the risks specified in the contingent buildings indemnity 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.
• All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• All sums paid with consent in writing from the insurance company to liberate the land from the risks specified in the contingent buildings indemnity insurance.
• Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the contingent buildings policy, as well as legal and associated costs.
• Expenses for 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 contingent buildings indemnity insurance, to the extent that such costs are rendered abortive by court decision.

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You also need to be sure that the answers on the application form are correct. Regardless of how remote a claim on the bank insurance policy might be you can rest assured that the insurer will check the details on any proposal form very carefully prior to any claim being paid out.

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Further considerations for contingent buildings indemnity insurance

Contingent Buildings insurance may satisfy lenders such as Yorkshire Bank Home Loans or Yorkshire Building Society 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.

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WhenIBought

Was contingent buildings insurance arranged because your lease left uncertainty over who must insure or reinstate the building? If that issue has resurfaced on a sale or remortgage, revisit what you were told when you bought. WhenIBought's defective lease page looks at problems with lease provisions, including insurance obligations, and offers a way to tell us what happened.

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The content set out above is in relation to properties in England and Wales.