Search Insurance : What The Mortgage Lender Says
In the last 18 months 12 lenders have changed their Part 2 Handbook instructions relating to 5.4.6. That particular section addresses the question ‘Does the lender accept search insurance and, if yes, what are the lender’s specific requirements?’
Even though some lenders dictate a blanket refusal of search insurance many lenders will accept depending on whether the case is a remortgage or purchase. Some lay down specific requirements relating to buy-to-let transactions. A significant proportion of lenders make it clear that where a lawyer takes out a policy they do so their own risk and must give an unqualified COT.
Occasionally, a lender clarifies what is policy must cover. Skipton, for example state ‘Any policy must cover our successors in title or be readily assignable (with no onerous conditions)’
The Mortgage Lender (TML) who launched in 2016 is the latest lender to make significant changes to section 5.4.6 of their handbook instructions. What makes their change particularly notable is the detailed list of what a search policy should cover.
Part of their new wording at 5.4.6 reads:
Any search insurance policy should cover the following:
1 any issues that would be discovered from a search in Form LLC1 of the Register of Local Land Charges with a full set of enquiries of the appropriate local authority in Form Con 29 or any official forms in substitution thereof;
2 any issues that would be discovered from an enquiry to the relevant sewerage or water undertaker in respect of sewerage or water matters contained in Form Con 29DW or any official form in substitution thereof;
3 any issues that would be discovered from an enquiry of the Coal Authority in respect coal mining matters contained in Form Con 29M or any official form in substitution thereof;
4 any issues that would be discovered from a commons registration, Environment Agency, Cheshire brine, tin, limestone or other mining search; and
5 any matter that would be discovered from a chancel search.
Let’s leave to one side whether there exists any search policies that cover 3,4 and 5 as there is broader question that comes to mind.
In explaining what a policy should include is this particular lender reflecting the expectation of other lenders?
Surely, now that this definition exists, the prudent conveyancer should ensure that any search policies to be put on risk should cover the areas that TML set out.
Many lenders in their answer to 5.4.6 require that the lawyer be satisfied that the insurance policy ‘adequately protects’ them. Whilst there is no definition of what ‘adequately protects’ means The Mortgage Lender may have just given a clue.
Some of the most significant recent changes to lenders’ Part 2 requirements are being covered in Lexsure’s series of free ‘In-house’ one hour training sessions. More information can be found at https://insideconveyancing.co.uk/in-house-training/
Kindly shared by Simon Seaton. non-practising solicitor