Lenders relax rules over local authority indemnity insurance as stamp duty deadline looms

Lenders relax rules over local authority indemnity insurance as stamp duty deadline looms


NatWest has historically only accepted the insurance for remortgages but said from December it is temporarily excepting it for purchase cases.

Skipton has changed its policy for purchase cases where search information is ‘significantly delayed’.

Around 20 councils in England and Wales are reporting turnaround times of between 40 and 60 working days to deal with local authority search requests, according to Searchflow’s website.

York is not currently processing any requests while Bedford and Hackney Borough Councils are quoting 180 working days. Hackney Borough Council was the victim of a cyber attack in November which has left it unable to provide the information.

To help reduce delays that homebuyers in these areas are experiencing, some lenders have agreed to accept the conveyancer’s indemnity insurance in place of the searches.

Alex Beavis, head of mortgage products at Skipton Building Society, said: “Skipton Building Society now accepts indemnity insurance for local authority searches on purchases, to provide an additional option for conveyancers should local searches be significantly delayed due to the exceptional demand associated with the stamp duty rush, plus the added pressures of working through the Covid-19 pandemic .

“This move is designed to take some pressure off purchase chains, keeping the market moving and hopefully helping more borrowers meet the 31 March deadline.”

NatWest said it would also accept the insurance on a temporary basis for purchase cases.


‘Extra choices’

Not all lenders, however, will proceed to completion without the searches which means brokers are having to give their clients an additional mortgage option of a lender that accepts the insurance.

Andrew Montlake, managing director, Coreco, said: “Borrowers who definitely want to complete before the stamp duty deadline are being offered extra choices. We’re showing them the best deal for their circumstances and if necessary an additional deal from a lender that accepts indemnity insurance.”

Barclays and Halifax will accept the insurance if the conveyancer is comfortable going ahead without reviewing information that could affect the property but Santander and Nationwide will not.

Mortgage Solutions has contacted HSBC.

David Hollingworth, associate director, communications, L&C, said: “Together with the search provider we are able to identify cases that will be affected by the delays at an early stage and then consider whether any of those cases could run into issues with the lender if indemnity insurance was used.

“That helped to flag a small number of cases and allow for appropriate action to be taken in placing with a lender that would be able to progress to completion.”

He added: “Skipton’s move to address this issue is a welcome one.”


Calling all lenders

Brokers are calling for more lenders to follow Skipton and NatWest’s lead.

Lea Karasavvas, managing director, Prolific Mortgage Finance, said: “Most lenders are aware of the issue in Hackney and are starting to accept indemnity insurance, but there are still a lot that will not. One way around this is for the buyer to instruct private searches which is when someone goes into the local council offices and has to manually look through the documents but as you can imagine the delay on this can be considerable with some solicitors saying this will take over six months.

“With most buyers wanting to complete by 31 March, this can mean that most people buying in Hackney where the average purchase price is over £500,001 will be stung with an extra £15,000 on their stamp duty bill as they will miss the deadline.

“If possible we need all lenders to take this into consideration and accept the indemnity insurance but they understandably need to listen to their own legal advice on whether they can or not.”


Risk to buyers

Indemnity insurance can be arranged to protect buyers from any search entries that could damage the property value but were not uncovered because the information was unavailable, for example a planned development that would be disruptive to the house. But proceeding without seeing searches can also put the buyers’ safety at risk.

Beth Rudolf, director of delivery, Conveyancing Associations, said: “For the buyer, insurance in place of the authority information is not always a good thing, albeit often worth it to enable their transaction to proceed.

“For example if there was a loft conversion then the buyer might assume that the loft conversion can be safely used as a bedroom when in fact the building control inspection might have revealed safety issues that mean that it can only safely be used as storage.”

Last year, the Conveyancing Association recommended that sellers should obtain the searches when their property is listed for sale that way by the time a buyer has made an offer the information is likely to have been returned and any issues uncovered can be dealt with by the seller cutting out delays.