Indemnity Insurance of Deed of Gift Lender conveyancing requirements
Lloyds TSB and Leeds Building Society, as with many mortgage companies, dictate their own requirements when it comes to deed of gift indemnity insurance. The content herein aims to help conveyancing lawyers on the different lender solicitors panel where the title to be charged incorporates deed of gift. Lawyers are advised to familiarise themselves with the CML handbook requirements for each lender, be it Yorkshire Bank Home Loans, RBS or Yorkshire Building Society. The content on this page Is not to be read as deed of gift indemnity insurance advice.
Need help with deed of gift indemnity insurance from your lender?
Being a conveyancing lawyer on a lender panel, you must notify to the mortgage company where it comes to your attention that the title to the property is subject to a deed of gift or a transaction at an apparent undervalue completed inside 5 years of the proposed mortgage. You need to be sure that the bank will acquire their interest in good faith and will be protected under the provisions of the Insolvency (No 2) Act 1994 against their security being set aside. Where you are not able to submit an unqualified COT, you must arrange transfer at undervalue or deed of gift indemnity insurance .
Please remember to obtain clear bankruptcy searches against all parties to any deed of gift or transaction with the potential of being regarded at an undervalue.
About Deed of Gift Indemnity Insurance
Deed of Gift Cover is normally required owing to a proposed or existing transfer at undervalue or deed of gift including gifts of money towards the acquisition of a property. The loss arises where the person who transferred or “gifted” the property (or the money) becomes insolvent their Trustee in Bankruptcy could set aside the transfer and claim an interest in the premises.
Natwest and HSBC like many banks, requirements are that where deed of gift indemnity insurance is to be taken out:
- the deed of gift indemnity insurance policy must not incorporate conditions which you are aware would invalidate or compromise the interests of the lender
- the minimum level of cover for the policy must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- the deed of gift indemnity insurance policy needs to be for the benefit of the bank and, if possible, in favour of the mortgagor and any subsequent registered proprietor or mortgagee. Where the borrower will not be protected by the deed of gift indemnity insurance policy, the borrower must be informed accordingly.
- your firm is required to disclose to the insurer all relevant information which you have obtained
- you must approve the terms of the deed of gift policy on behalf of the mortgage company
- your practice must supply a copy of the deed of gift indemnity insurance to the borrower and explain to the borrower why the deed of gift indemnity insurance policy was effected and that additional insurance could be required if there is additional lending against the security of the property
- the deed of gift indemnity insurance policy must be effected without charge to the lender
- your practice is duty bound to spell out to the borrower that the borrower must comply with any conditions of the deed of gift indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the insurance
| Lender | Requirement |
|---|---|
| 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). Where a property is being sold at undervalue and an equity gift is being provided, the conveyancer must ensure the seller obtains an Insolvency Act Indemnity Insurance Policy and provides evidence to you, so that you are comfortable an appropriate policy is in place to Aldermore’s satisfaction. This indemnity insurance aims to cover Aldermore against any future claims by creditors of the seller that may challenge the sale. |
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Aviva Equity Release | Full value of the property. |
| Barnsley Building Society | 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. |
| Chelsea Building Society | 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. |
| Clydesdale Bank | Open market value of property. |
| Halifax | The value of the property. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| ITL Mortgages | Minimum of the value of the property. |
| 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. |
| Masthaven Bank | An amount at least equal to the total mortgage advance. Any indemnity insurance policy must protect the borrowers, any successors in title and any mortgagee. |
| 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. |
| Paragon Mortgages Ltd | An amount at least equal to the stated value of the Property. |
| Precise Mortgages 2026 | An amount at least equal to 110% of the mortgage valuation. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Rooftop Mortgages | The value of the property for mortgage purposes as disclosed in the valuation. |
| Saffron Building Society | Higher of purchase price or valuation. 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). |
| TSB | 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 deed of gift indemnity insurance are shown in the policy document. Conveyancing Practitioners should point the borrower to the deed of gift indemnity insurance policy itself. Deed of Gift indemnity insurance is designed to afford indemnity in respect of the risks specified in the policy schedule - so you should check the document to determine that it is in order. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.Deed of Gift Contingency insurance: Significant features 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. Deed of Gift indemnity insurance Policies should be checked for the following- All sums paid with consent in writing from the insurance company to liberate the land from the risks specified in the deed of gift indemnity insurance.
- The cost 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 proceedings regarding the risks specified in the deed of gift policy, including incurred costs and expenses.
- All other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- The cost of works (including professional fees) for the purpose of the development commenced, before the commencement of proceedings for the enforcement of the risks specified in the deed of gift policy, 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 deed of gift indemnity insurance.
The above information is in relation to properties in England and Wales.