Indemnity Insurance of Outstanding Leasehold Interest Mortgage Company conveyancing requirements

Godiva Mortgages and Birmingham Midshires, like the majority of lenders, dictate their own specific instructions when it comes to outstanding leasehold interest indemnity insurance. This page is designed to help domestic conveyancing practitioners on the various bank solicitors panel where the title to be charged incorporates outstanding leasehold interest. It is not a alternative for checking the CML handbook requirements for each lender, whether it be Yorkshire Bank Home Loans, Coventry BS or Virgin Money. The content on this page is not focused on outstanding leasehold interest indemnity insurance requirements.

Need help with outstanding leasehold interest indemnity insurance from your lender?

---

Halifax and HSBC like most lenders, obligations require that where outstanding leasehold interest indemnity insurance is effected:

• the outstanding leasehold interest indemnity insurance policy should always be in favor of the lender and, if possible, for the benefit of the borrower and any subsequent registered proprietor or mortgagee. Where the borrower will not be covered by the outstanding leasehold interest indemnity insurance policy, the borrower should be informed accordingly.
• your firm must provide a duplicate of the outstanding leasehold interest indemnity insurance to the borrower and explain to the borrower why the outstanding leasehold interest indemnity insurance policy was effected and that a further policy may be mandatory if there is additional borrowing against the security of the property
• the outstanding leasehold interest indemnity insurance policy must be effected at no charge to the mortgage company
• the limit of indemnity must meet the requirements for the mortgage company (see UK Finance Lenders’ Handbook Part 2 )
• your practice are responsible for approving the terms of the outstanding leasehold interest policy on behalf of the mortgage company
• the outstanding leasehold interest indemnity insurance policy must not contain conditions which you are aware would void or compromise the interests of the mortgage company
• your firm must spell out to the mortgagor that the borrower will need to comply with any conditions of the outstanding leasehold interest indemnity insurance policy and that the mortgagor should notify the lender of any notice or potential claim in respect of the policy
• you is obliged to disclose to the insurer all relevant information which you have obtained

Regarding the extent of cover for the outstanding leasehold interest indemnity insurance policy (or for that matter any indemnity insurance), consider the following sampling of Paragraph 9.2 of the Part 2 requirements for banks:

Outstanding Leasehold Interest Contingency Insurance : Reflections

The extent of the terms for outstanding leasehold interest indemnity insurance are identified in the policy document. Property lawyers are obliged to direct your non-lender client to the outstanding leasehold interest indemnity insurance policy paperwork. The intention of outstanding leasehold interest indemnity insurance is to grant indemnity in respect of the risks set out in the policy schedule - so it is essential check the schedule to determine that it is as it should be. The continuance of this non-investment insurance contract is in perpetuity unless otherwise stated in the outstanding leasehold interest indemnity insurance policy. Again, please check that this is as you expected.

---

Outstanding Leasehold Interest Contingency insurance: Significant features 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. Outstanding Leasehold Interest 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 insurer
• Reimbursement for compensation incurred in any proceedings concerning the risks specified in the outstanding leasehold interest policy, as well as legal and associated costs.
• The cost of altering or destroying 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.
• Money paid with the written consent of the insurance company to liberate the property from the risks specified in the outstanding leasehold interest insurance.
• Expenses for 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 outstanding leasehold interest policy, to the extent that such costs are rendered abortive by court decision.
• Loss in market value resulting from the successful enforcement of the risks specified in the outstanding leasehold interest indemnity insurance.

---

Don't forget to check what is excluded from the outstanding leasehold interest policy e.g. does the policy cover any property that has been altered within the year prior to the policy being put on risk? Does it cover legal costs?

---

Supplemental considerations for outstanding leasehold interest indemnity insurance

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

---

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