Lender conveyancing panel requirements re Good Leasehold Title Indemnity Insurance

HSBC and Barclays, in common with the majority of banks, dictate their own specific instructions when it comes to good leasehold title indemnity insurance. The purpose of this page to assist property law solicitors on the various mortgage company conveyancing panel where the title for the the property to be mortgaged contains good leasehold title. It is not a substitute for checking the CML handbook requirements for each mortgage company, be it Yorkshire Bank Home Loans, Lloyds TSB or Coventry BS. The information on this page Is not to be read as good leasehold title indemnity insurance advice.

Need help with good leasehold title indemnity insurance from your lender?

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Chelsea BS and Bank of Scotland as with the majority of mortgage companies, instructions are such that where good leasehold title indemnity insurance is effected:

• you must approve the terms of the good leasehold title policy on behalf of the mortgage company
• the good leasehold title indemnity insurance policy needs to be for the benefit of the lender and, if possible, for the benefit of the mortgagor and any next registered proprietor or lender. Where the borrower will not be protected by the good leasehold title indemnity insurance policy, the borrower must be advised accordingly.
• the level of indemnity must meet the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
• the good leasehold title indemnity insurance policy should not incorporate terms that you know would void or prejudice the interests of the bank
• your practice is obliged to reveal to the insurer all relevant information which you have gathered
• you must supply a duplicate of the good leasehold title indemnity insurance to the mortgagor and explain to the borrower why the good leasehold title indemnity insurance policy was effected and that additional insurance may be required if there is supplemental borrowing against the mortgaged property
• your firm is duty bound to point out to the mortgagor that the borrower is obliged to adhere to any conditions of the good leasehold title indemnity insurance policy and that the mortgagor should notify the mortgage company of any notice or potential claim in relation to the insurance
• the good leasehold title indemnity insurance policy should be effected at no charge to the bank

As to the level of cover for the good leasehold title indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the UK Finance handbook PII requirements for banks:

General Good Leasehold Title indemnity insurance points to consider

The extent of the terms for good leasehold title indemnity insurance are shown in the policy paperwork. Conveyancing solicitors are obliged to direct the borrower to the good leasehold title indemnity insurance policy paperwork. The intention of good leasehold title indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to ensure it is as it should be. The continuance of this non-investment insurance contract is in perpetuity unless the policy says something to the contrary. Again, please check that this is as you expected.

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Good Leasehold Title Contingency insurance: Important characteristics and benefits:

This policy would usually provide protection from financial loss that might arise in the event of a third party making a cliam in respect of the risks identified in the policy document. Good Leasehold Title indemnity insurance Policies should be checked for the following

• All ancillary 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 started, before the commencement of proceedings for the enforcement of the risks specified in the good leasehold title indemnity insurance, to the extent that such costs are rendered abortive by court decision.
• Market value reduction resulting from the successful enforcement of the risks specified in the good leasehold title policy.
• Money paid with the written consent of the insurance company to free the land from the risks specified in the good leasehold title insurance.
• Reimbursement for compensation incurred in any proceedings in respect of the risks specified in the good leasehold title indemnity insurance, as well as solicitors charges.
• 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.

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You also need to be sure that the answers on the application form are accurate. Regardless of how remote a claim on the bank insurance policy might be you can rest assured that the insurer will check the details on any proposal form very carefully before any claim is admitted.

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Good Leasehold Title Indemnity Insurance has limitations - Supplemental considerations

Good Leasehold Title 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 good leasehold title indemnity cover will not necessarily be the right solution.

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The above information is in relation to properties in England and Wales.