Indemnity Insurance of Forfeiture of Lease Bank conveyancing requirements
Nationwide and Barclays, in common with many banks, have their own requirements when it comes to forfeiture of lease indemnity insurance. This page is designed to help domestic conveyancing practitioners on the various bank approved list of panel lawyers where the title to be charged includes forfeiture of lease. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each bank, be it Bank of Scotland, Natwest or Halifax. The content on this page is not focused on forfeiture of lease indemnity insurance requirements.
Need help with forfeiture of lease indemnity insurance from your lender?
HSBC and Yorkshire Bank Home Loans in common with most lenders, obligations require that where forfeiture of lease indemnity insurance is to be taken out:
- the forfeiture of lease indemnity insurance policy should be effected without expense to the mortgage company
- your practice must approve the terms of the forfeiture of lease policy on behalf of the bank
- the minimum level of cover for the policy must satisfy the requirements for the bank (see UK Finance Lenders’ Handbook Part 2 )
- your firm must spell out to the mortgagor that the borrower will need to comply with any conditions of the forfeiture of lease indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the policy
- your practice is obliged to disclose to the insurer all relevant information which you have acquired
- you must send a duplicate of the forfeiture of lease indemnity insurance to the mortgagor and explain to the borrower why the forfeiture of lease indemnity insurance policy was effected and that additional insurance may be necessary if there is additional borrowing against the security of the property
- the forfeiture of lease indemnity insurance policy should not incorporate conditions which you recognise would invalidate or compromise the interests of the lender
- the forfeiture of lease indemnity insurance policy must be for the benefit of the bank and, wherever possible, in favour of the mortgagor and any subsequent registered proprietor or mortgage company. If the mortgagor will not be protected by the forfeiture of lease indemnity insurance policy, the mortgagor must be advised accordingly.
| Lender | Requirement |
|---|---|
| Allied Irish Bank | At least the amount of the mortgage advance. |
| Bradford & Bingley | Amount of loan + 15% |
| Coventry Building Society | Minimum of the value of the property. |
| 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 | The value of the property. |
| Handelsbanken | Purchase price or 110% of mortgage advance, whichever is the greater. |
| 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. |
| Lloyds Bank Private Banking | Not less than the Facility plus 10%. |
| Manchester Building Society | Purchases- higher of the Purchase price & valuation Re-mortgages- Loan x 115%. |
| National Counties Building Society | An amount at least equal to the mortgage advance. |
| National Westminster Bank | An amount equal to the value of the property. |
| Progressive BS | The limit of indemnity insurance should be the purchase price or valuation - whichever is higher. |
| 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). |
| Secure Trust Bank | An amount at least equal to the market value. 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). |
| RBS (One Account) | An amount equal to the value of the property. |
| Topaz Finance | 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. |
Forfeiture of Lease Contingency Insurance : Reflections
The full terms, conditions and exclusions for forfeiture of lease indemnity insurance are shown in the policy document. Conveyancing solicitors are obliged to direct the borrower to the forfeiture of lease indemnity insurance policy paperwork. The intention of forfeiture of lease indemnity insurance is to provide indemnity in respect of the risks specified in the policy schedule - so it’s important to check the schedule to determine that it is correct. The lifetime of this non-investment insurance agreement is in perpetuity unless otherwise stated in the forfeiture of lease indemnity insurance policy. It is well worth checking that the time frame is correct.Significant features and benefits of forfeiture of lease indemnity insurance :
The policy will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the forfeiture of lease indemnity insurance schedule. Forfeiture of Lease indemnity insurance Policies should be checked for the following- Market value reduction resulting from the successful enforcement of the risks specified in the forfeiture of lease policy.
- All other costs and expenses incurred by the Insured with the written consent of the relevant insurance company
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the forfeiture of lease indemnity insurance, as well as solicitors charges.
- The cost of altering or demolishing 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.
- 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 forfeiture of lease insurance, to the extent that such costs are rendered abortive by court order.
- Money paid with the written consent of the insurance company to liberate the land from the risks specified in the forfeiture of lease indemnity insurance.
Don't forget to consider what is not included in the forfeiture of lease policy e.g. does the policy cover any residence that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?
Forfeiture of Lease Indemnity Insurance has limitations - Other considerations
Forfeiture of Lease insurance may satisfy lenders such as RBS or Birmingham Midshires 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.WhenIBought
If the forfeiture concern arises from a missing or inadequate mortgagee protection clause in your lease, did anyone explain that issue when you bought? WhenIBought's defective lease page discusses this type of lease provision. If it is now affecting your sale or remortgage, you can tell us what happened and what advice you remember receiving.
Information contained within this webpage is for general information for Regulated law firms in England and Wales on the the mortgage company solicitor panel, it does not constitute advice for members of the public who should contact their lawyer for advice relating to the bank 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 forfeiture of lease Policies is if you make any contact with any party who might cause a claim under the Policy, it can invalidate the cover.
The content set out above covers to properties in England and Wales.