Lack of Building Regulation Approval Indemnity Insurance Mortgage Company conveyancing requirements
Yorkshire Bank Home Loans and Bank of Scotland, as with most mortgage companies, dictate their own specific instructions when it comes to lack of building regulation approval indemnity insurance. This page is designed to help residential conveyancing lawyers on the various lender conveyancing panel where the title to be charged includes lack of building regulation approval. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each bank, whether it be Lloyds TSB, Barnsley BS or RBS. The information on this page is not focused on lack of building regulation approval indemnity insurance requirements.
Need help with lack of building regulation approval indemnity insurance from your lender?
As a property lawyer on a mortgage company panel you must conduct due diligence as to (including any supplemental investigations to clarify any issues which may arise) to ensure the residence or any works thereto has the correct Building Regulation Approval and that the property may be the subject of enforcement action.
Where there is evidence of a lack of building regulation approval but in your professional opinion there is no reasonable chance of enforcement action and, following appropriate enquiries, and you are assured that the title is good and marketable and can provide an unqualified COT, the mortgage company will not insist on lack of building regulation approval indemnity insurance and you may go ahead without it.
If there is such evidence that not all building regulation approvals will be in place on completion, where you are not able to provide an unconditional COT, you should reveal this to the bank in accordance with 2.3. of Part two of the Council of Mortgage Lenders Handbook. Each mortgage company such as Yorkshire Bank Home Loans or Bank of Scotland may adopt a different stance.
About Lack of Building Regulation Approval Indemnity Insurance
Lack of Building Regulation Approval Cover is typically needed where no proof of building regulation consent can be supplied for alterations (or FENSA certificate for windows) that have been in existence for 12 months or more, whether a residential property or large commercial project. The loss arises following successful enforcement action by the local authority. In a typical conveyancing scenario the owner would be expected to pay the premium for the Lack of Building Regulation Approval Indemnity Insurance, which would be taken out in the buyer’s name as well as the bank.
A lack of building regulation approval indemnity insurance policy is usually less expensive than seeking retrospective certificate and is without question significantly quicker. The downside is that the risk of enforcement action does not disappear.
Birmingham Midshires and Santander in common with most banks, requirements are that where lack of building regulation approval indemnity insurance is effected:
- you must disclose to the insurer all relevant information which you have acquired
- the level of indemnity must satisfy the requirements for the lender (See Part II Handbook requirements )
- your firm must spell out to the borrower that the borrower will need to comply with any conditions of the lack of building regulation approval indemnity insurance policy and that the mortgagor should notify the bank of any notice or potential claim in respect of the insurance
- the lack of building regulation approval indemnity insurance policy must be for the benefit of the mortgage company and, if possible, in favour of the borrower and any next registered proprietor or bank. Where the mortgagor will not be covered by the lack of building regulation approval indemnity insurance policy, you must advise the mortgagor of this fact.
- the lack of building regulation approval indemnity insurance policy must not incorporate conditions that you know would void or prejudice the interests of the lender
- your practice are responsible for approving the terms of the lack of building regulation approval policy on behalf of the lender
- you must send a duplicate of the lack of building regulation approval indemnity insurance to the mortgagor and explain to the mortgagor why the lack of building regulation approval indemnity insurance policy was effected and that a further policy could be required if there is further lending against the mortgaged property
- the lack of building regulation approval indemnity insurance policy must be placed on risk without expense to the mortgage company
| Lender | Requirement |
|---|---|
| Ahli United Bank | An amount equal to the value of the Mortgaged Property |
| Barclays plc | Higher of purchase price or valuation |
| Birmingham Midshires | An amount equal to at least 110% of the purchase price or value, whichever is higher. |
| Co operative Bank | An amount equal to at least 110% of the mortgage advance. |
| Darlington Building Society | The higher of value or purchase price of the property. |
| Ecology Building Society | An amount equal to at least 110% of the mortgage advance |
| Family Building Society | An amount at least equal to the mortgage advance. |
| Hampden | The open market value of the property according to the valuation report. |
| ITL Mortgages | Minimum of the value of the property. |
| LiveMore | An amount equal to the purchase price or value of the property, whichever is higher |
| Market Harborough Building Society | Purchase price or valuation - higher of the two |
| Metro Bank | The open market value of the property according to the valuation report. |
| ModaMortgages | An amount at least equal to 110% of the mortgage valuation. |
| Mortgage Agency Services | 110% of the purchase price or valuation, whichever is greater |
| Principality Building Society | Full market value of the property is preferred but if this is not available we will accept the loan advance amount as minimum. You must approve the policy on our behalf. The estimated property value is stated in the Mortgage Offer in remortgage cases. Otherwise it will be stipulated in the Valuation. |
| Rely Mortgages | An amount at least equal to 110% of the mortgage valuation. |
| Skipton Building Society | For lender only cover we will accept a minimum of 110% (index-linked) of the amount of the loan. |
| The Mortgage Lender | An amount at least equal to the mortgage advance. |
| Tipton Coseley Building Society | Minimum of mortgage advance. |
| Virgin | We require the full market value of the Property. Where this isn't available, we'll accept the loan amount as a minimum. |
Non lender-specific considerations
The full terms, conditions and exclusions for lack of building regulation approval indemnity insurance are identified in the policy paperwork. Property lawyers should point your non-lender client to the lack of building regulation approval indemnity insurance policy document. Lack of Building Regulation Approval Contingency insurance is devised to afford indemnity in respect of the risks set out in the policy schedule - so you should check any draft 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. It is well worth checking that the time frame is correct.Lack of Building Regulation Approval indemnity insurance: Important characteristics and benefits:
The insurance will normally cover where someone claims to be entitled to the benefit of the specified risks, stated in the lack of building regulation approval indemnity insurance schedule. Lack of Building Regulation Approval indemnity insurance Cover normally includes- Diminution in value resulting from the successful enforcement of the risks specified in the lack of building regulation approval insurance.
- All ancillary costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Expenses for works (including architects’ and surveyors’ 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 lack of building regulation approval policy, to the extent that such costs are rendered abortive by court decision.
- Liability for damages or compensation incurred in any proceedings regarding the risks specified in the lack of building regulation approval policy, including legal and associated costs.
- 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.
- All sums paid with the written consent of the insurance company to free the property from the risks specified in the lack of building regulation approval policy.
You also need to be sure that the answers on the application form are accurate. However remote the likelihood of a claim on the lender insurance policy might be you can be sure that the insurer will check the details on any proposal form thoroughly prior to any claim being admitted.
Other considerations for lack of building regulation approval indemnity insurance
Lack of Building Regulation Approval Indemnity policies can provide effective protection, but non-lender clients should be asked to give pause for thought and consider that the consequences of not being able to enjoy the property as anticipated may mean that lack of building regulation approval indemnity cover will not necessarily be the right solution.WhenIBought
Are questions about building regulations approval delaying a sale or remortgage for work that was already there when you bought? Think back to what your conveyancer said about certificates, any further checks and the purpose of any indemnity insurance. WhenIBought's building regulations page explores problems discovered after purchase and gives you a way to tell us what has happened.
The above information covers to properties in England and Wales.