Mortgage Company conveyancing panel requirements re Insolvency Act Indemnity Insurance
Santander and Natwest, as with most mortgage companies, dictate their own specific instructions when it comes to insolvency act indemnity insurance. The content herein aims to help conveyancing practitioners on the different mortgage company approved list of panel lawyers where the title for the the property to be mortgaged contains insolvency act. Lawyers are advised to familiarise themselves with the Council of Mortgage Lenders’ handbook requirements for each lender, whether it be Coventry BS, Nationwide or Godiva Mortgages. The information on this page is not focused on insolvency act indemnity insurance requirements.
Need help with insolvency act indemnity insurance from your lender?
Being a solicitor on a mortgage company panel, you must notify to the lender where it comes to your attention that the title to the property was subject to a Insolvency Act or a transaction at an apparent undervalue completed inside 5 years of the proposed home loan. You need to be sure 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. If you are not able to issue an unqualified certificate of title, you must arrange transfer at undervalue or Insolvency Act indemnity insurance.
You must also obtain clear bankruptcy checks against all parties to any deed of gift or transaction at an apparent undervalue.
About Insolvency Act Indemnity Insurance
Thousands of conveyancer accross the UK regularly recommend Insolvency Act insurance owing to an expected or existing transfer at undervalue or deed of gift including gifts of money towards the purchase of a residence. The loss arises where the person who transferred or “gifted” the premises (or the money) becomes insolvent their Trustee in Bankruptcy could set aside the transfer and claim an interest in the premises.
Barnsley BS and Birmingham Midshires as with the majority of banks, requirements are that where insolvency act indemnity insurance is to be put on risk:
- the insolvency act indemnity insurance policy needs to be in favor of the mortgage company and, if possible, in favour of the borrower and any next registered proprietor or lender. Where the borrower will not be protected by the insolvency act indemnity insurance policy, you must advise the mortgagor of this fact.
- your firm is obliged to disclose to the insurer all relevant information which you have obtained
- your firm must explain to the mortgagor that the borrower must adhere to any conditions of the insolvency act indemnity insurance policy and that the borrower should notify the mortgage company of any notice or potential claim in relation to the insurance
- the minimum level of cover for the policy must satisfy the requirements for the lender (see UK Finance Lenders’ Handbook Part 2 )
- the insolvency act indemnity insurance policy should be effected at no expense to the bank
- you must provide a copy of the insolvency act indemnity insurance to the borrower and explain to the borrower why the insolvency act indemnity insurance policy was effected and that a further policy might be necessary if there is additional borrowing against the mortgaged property
- your practice are responsible for approving the terms of the insolvency act policy on behalf of the lender
- the insolvency act indemnity insurance policy must not contain terms that you are aware would void or compromise the interests of the bank
| Lender | Requirement |
|---|---|
| Adam & Company | |
| Allied Irish Bank | |
| Barclays plc | |
| Better HomeOwnership | |
| Birmingham Bank | |
| GE Money | |
| Godiva Mortgages | |
| HSBC UK Bank | |
| Harpenden Building Society | |
| ModaMortgages | |
| NRAM Ltd | |
| New Street Mortgages | |
| Principality Building Society | |
| Santander | |
| State Bank of India UK | |
| Tandem Bank | |
| The Mortgage Works | |
| RBS - Direct Line | |
| RBS (One Account) | |
| Tipton Coseley Building Society |
Non lender-specific considerations
The full terms, conditions and exclusions for insolvency act indemnity insurance are identified in the policy document. Property lawyers should point your non-lender client to the insolvency act indemnity insurance policy itself. Insolvency Act indemnity insurance is devised to provide indemnity in respect of the risks set out in the policy schedule - so it’s important to check the document to ensure it is in order. The duration of this non-investment insurance contract is in perpetuity unless otherwise stated in the insolvency act indemnity insurance policy. Again, please check that this is as you expected.Important features and benefits of insolvency act 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. Insolvency Act indemnity insurance Policies should be checked for the following- 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 other costs and expenses incurred by the Insured with consent in writing from the relevant insurance company
- Liability for damages or compensation incurred in any proceedings concerning the risks specified in the insolvency act insurance, including incurred costs and expenses.
- Loss in market value resulting from the successful enforcement of the risks specified in the insolvency act insurance.
- 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 insolvency act policy, to the extent that such costs are rendered abortive by court decision.
- All sums paid with the written consent of the insurance company to liberate the property from the risks specified in the insolvency act indemnity insurance.
As is the case with all conventional insurance, all material information needs to be disclosed to the insurance company at the outset and throughout the policy term, otherwise the insolvency act policy will not be valid.
Additional considerations for insolvency act indemnity insurance
Bear in mind, that if a covenant is breached and changes have to be made, simply getting monetary compensation from insolvency act insurance may be adequate for your client.The above information is in relation to properties in England and Wales.