Lender conveyancing panel conditions re Deed of Gift Indemnity Insurance
Accord and Coventry BS, like the majority of banks, have their own requirements when it comes to deed of gift indemnity insurance. This page sets out to enlighten conveyancing lawyers on the numerous mortgage company solicitors panel where the title to be charged incorporates deed of gift. Solicitors should still check the Council of Mortgage Lenders’ handbook requirements for each bank, for example Birmingham Midshires, RBS or Virgin Money. 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 practitioner 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 within five years of the proposed home loan. You need to be satisfied 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 at an apparent undervalue.
About Deed of Gift Indemnity Insurance
Deed of Gift Insurance is normally needed owing to a proposed or existing transfer at undervalue or deed of gift including gifts of money towards the acquisition of a property. The potential loss arises because if the person who transferred or “gifted” the premises (or the money) becomes bankrupt their Trustee in Bankruptcy could set aside the transfer and claim an interest in the residence.
Nationwide and Chelsea BS like most mortgage companies, instructions are such that where deed of gift indemnity insurance is to be taken out:
- your practice must approve the terms of the deed of gift policy on behalf of the lender
- your firm must disclose to the insurer all relevant information which you have acquired
- the minimum level of cover for the policy must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
- the deed of gift indemnity insurance policy should not contain terms which you know would invalidate or prejudice the interests of the bank
- the deed of gift indemnity insurance policy should be placed on risk without charge to the bank
- you must explain to the mortgagor that the borrower must adhere to any conditions of the deed of gift indemnity insurance policy and that the borrower should notify the bank of any notice or potential claim in respect of the policy
- you must send 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 supplemental borrowing against the mortgaged property
- the deed of gift indemnity insurance policy should always be in favor of the lender and, wherever possible, for the benefit of the borrower and any future registered proprietor or mortgagee. Where the borrower will not be protected by the deed of gift indemnity insurance policy, the borrower needs to be advised accordingly.
| Lender | Requirement |
|---|---|
| Atom Bank | At least the open market value of the property according to the valuation report. |
| Bank of Scotland | The value of the property. |
| Better HomeOwnership | An amount to cover the mortgage advance as a minimum. |
| Bradford & Bingley | Amount of loan + 15% |
| Family Building Society | An amount at least equal to the mortgage advance. |
| 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. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| Metro Bank | The open market value of the property according to the valuation report. |
| National Westminster Bank | An amount equal to the value of the property. |
| Perenna | The higher of the purchase price or 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). |
| Scottish Building Society | Amount of mortgage plus 25%. |
| 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. |
| State Bank of India UK | The purchase price or value of the property, whichever is the higher. |
| TSB | The value of the property |
| The Mortgage Business | An amount at least equal to the mortgage advance/credit limit - whichever is the highest. |
| RBS - Virgin One | An amount equal to the value of the property. |
| Vida Homeloans | It must be for a minimum of 110% of the purchase price or valuation, whichever is greater |
| Yorkshire Bank | Open market value of property. |
| Zephyr Mortgages | Valuation or purchase price, whichever is higher. The policy must always benefit the borrower and any subsequent owner or mortgagee - the policy must be index linked. |
General Deed of Gift indemnity insurance points to consider
The extent of the terms for deed of gift indemnity insurance are shown in the policy document. Conveyancing solicitors should direct your non-lender client to the deed of gift indemnity insurance policy paperwork. Deed of Gift indemnity insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so it’s important to check any draft to ensure it is as it should be. The continuance of this non-investment insurance agreement is in perpetuity unless otherwise stated in the deed of gift indemnity insurance policy. It is well worth checking that the time frame is correct.Deed of Gift Contingency insurance: Important features and benefits:
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the deed of gift indemnity insurance schedule. Deed of Gift 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.
- Money paid with the written consent of the insurance company to free the property from the risks specified in the deed of gift policy.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurer
- The cost of works (including architects’ and surveyors’ fees) for the purpose of the development commenced, prior to proceedings for the enforcement of the risks specified in the deed of gift indemnity insurance, to the extent that such costs are rendered abortive by court order.
- Loss in market value resulting from the successful enforcement of the risks specified in the deed of gift policy.
- Liability for damages or compensation incurred in any proceedings in respect of the risks specified in the deed of gift insurance, including solicitors charges.
The above information covers to properties in England and Wales.