Where a buyer is obtaining a mortgage lender and that lender does not arrange the building insurance the conveyancing solicitor must check the insurance complies with the lender’s requirements.
A conveyancing solicitor is obliged, if the property is not insured in accordance with the specific lenders requirements, to notify the lender which could result in the lender refusing to lend.
The conveyancing lawyer has to check that the amount of buildings insurance cover is at least the amount referred to in the mortgage offer. If the property is part of a larger building and there is a common insurance policy, the total sum insured for the building must be not less than the total number of flats multiplied by the amount set out in the mortgage offer for the property.
The buildings insurance cover must be index linked and in many cases the lender will require that the excess should not exceed the amount of £1000.
All of the following risks need to be covered in the insurance policy:
Fire; lightning; aircraft; explosion; earthquake; storm; flood; escape of water or oil; riot; malicious damage; theft or attempted theft; falling trees and branches and aerials; subsidence; heave; landslip; collision; accidental damage to underground services; professional fees, demolition and site clearance costs; and public liability to anyone else
Some lenders require the conveyancing lawyer to obtain before completion the insurer’s confirmation that the insurer will notify the lender if the policy is not renewed or is cancelled.