Absentee Landlord Indemnity Insurance Mortgage Company conveyancing requirements

Bank of Scotland and Barnsley BS, as with many banks, set their own specific instructions when it comes to absentee landlord indemnity insurance. The purpose of this page to assist property law practitioners on the numerous bank approved list of panel lawyers where the title to be charged contains absentee landlord. It is not a substitute for checking the Council of Mortgage Lenders’ handbook requirements for each bank, for example Virgin Money, Chelsea BS or Santander. The information on this page is not focused on absentee landlord indemnity insurance requirements.

Need help with absentee landlord indemnity insurance from your lender?

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In your capacity as a conveyancing lawyer on a lender panel you must disclose to the bank (see PII of the UK Finance Lenders’ Handbook) if it becomes apparent that the landlord is either missing or insolvent. If the lender are to lend, they may ask you to take out missing landlord indemnity policy. In some conveyancing transactions a buyer or bank might accept a missing landlord indemnity policy but many purchasers or lenders will not be willing to move forward. See 5.14.15 to see if the bank accept indemnity insurance if the landlord is absent or insolvent. Examples of such requirements as follows:

About Absentee Landlord Indemnity Insurance

Absentee Landlord Cover is typically required when the freeholder or landlord of land or property is insolvent, absent or where the company is no longer in existence. This results in an inability to pay ground rent and seek permission to lease assignments and alterations to the premises. The loss arises because the landlord may request ground rent or attempt forfeiture of the lease alleging breach of covenant should they subsequently appear.

Godiva Mortgages and Natwest like the majority of mortgage companies, obligations require that where absentee landlord indemnity insurance is to be put on risk:

• you is obliged to disclose to the insurer all relevant information which you have obtained
• your firm must send a copy of the absentee landlord indemnity insurance to the borrower and explain to the mortgagor why the absentee landlord indemnity insurance policy was effected and that additional insurance might be necessary if there is additional lending against the mortgaged property
• your firm must approve the terms of the absentee landlord policy on behalf of the bank
• the absentee landlord indemnity insurance policy needs to be in favor of the mortgage company and, wherever possible, for the benefit of the borrower and any next registered proprietor or lender. If the mortgagor will not be protected by the absentee landlord indemnity insurance policy, you must advise the borrower of this fact.
• your practice must explain to the mortgagor that the borrower is obliged to comply with any conditions of the absentee landlord indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the insurance
• the absentee landlord indemnity insurance policy should not contain terms that you recognise would invalidate or compromise the interests of the bank
• the absentee landlord indemnity insurance policy should be effected without cost to the lender
• the limit of indemnity must meet the requirements for the lender (See Part II Handbook requirements )

As to the level of cover for the absentee landlord indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the Part 2 requirements for mortgage companies:

General Absentee Landlord indemnity insurance points to consider

The extent of the terms for absentee landlord indemnity insurance are shown in the policy paperwork. Conveyancing Practitioners should direct the borrower to the absentee landlord indemnity insurance policy document. Absentee Landlord Contingency insurance is devised to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check any draft to ensure it is correct. The duration of this non-investment insurance agreement is in perpetuity unless the policy says something to the contrary. Adequacy in this regard should be checked.

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Significant aspects and benefits of absentee landlord Contingency insurance :

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. Absentee Landlord indemnity insurance Policies should be checked for the following

• Money paid with consent in writing from the insurance company to free the property from the risks specified in the absentee landlord insurance.
• Expenses for works (including architects’ and surveyors’ fees) for the purpose of the development started, prior to proceedings for the enforcement of the risks specified in the absentee landlord policy, to the extent that such costs are rendered abortive by court order.
• 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 ancillary costs and expenses incurred by the Insured with the written consent of the relevant insurance company
• Reimbursement for compensation incurred in any action concerning the risks specified in the absentee landlord insurance, including incurred costs and expenses.
• Loss in market value due to the successful enforcement of the risks specified in the absentee landlord insurance.

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Always consider what is excluded from the absentee landlord indemnity insurance e.g. does the policy cover any property that has been altered within the 12 months prior to the commencement of the policy? Are legal costs covered?

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Additional considerations for absentee landlord indemnity insurance

Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from absentee landlord insurance may be adequate for your client.

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The above information covers to properties in England and Wales.