For decades, perhaps even longer, there has been the ongoing debate of whether an insurance policy is worth taking out. Everyone has a view, generally depending on personal experience.
In the world of conveyancing, a recent survey¹ showed that 20% of transactions needed some form of title insurance. Of course, the client can choose if they take it out (unless the lender insists on cover being put in place) but if there is insurance available then it is down to the conveyancer to mention it.
But there are some situations where the existence of insurance can actually be the difference between a transaction proceeding or not – and a good example of this is search insurance.
Search insurance – or to be more specific, one of the Search insurances as there are three types:
- No Search Insurance (where you don’t apply for searches and rely on the insurance instead,
- Search Delay Insurance (where you have applied for searches but they might not arrive in time), and
- Search Validation Insurance (where searches are slightly ‘old’ and may not present the up-to-date picture) used generally for remortgages.
Clearly there is a strong argument for offering and taking out one of the above. Even without delays in the provision of searches, insurance can present a much more straightforward and cost-effective option. In the present circumstances the availability of cover can support a transaction that may not otherwise complete. At the time of writing, there is a variation in the time taken for searches to be completed. Some local authorities are very swift, some are slower. In the well documented case of Hackney Borough Council and their cyber-attack last year, they reportedly have been recommending solicitors to take out search insurance as they cannot, with any certainty, deliver search results before the end of the SDLT holiday (currently planned for March 31st 2021).
Although solicitors and conveyancers have generally been advising clients since the end of last year that there is no certainty to complete by the 31st March, some estate agents may be overpromising, putting further pressure on residential conveyancers to deliver. So anything that can assist must surely be worth considering?
The issue with search insurances is not so much whether they are worth it but whether they are an acceptable solution and particularly whether the mortgage lender will accept them.
So will they, or won’t they?
That’s a trickier one to answer. The simple answer is the vast majority will. On a quick analysis of the UK Finance Lender Handbook, of the 125 or so lenders listed, only 17 won’t accept any type of search insurance in any circumstance. That means over 85% of lenders listed will accept them, at least in some circumstances and more and more will accept search delay insurance if there is a delay in getting the search results back. This might be temporary, we won’t know until later in the year, and depends on whether the SDLT holiday is extended or not, but in any case this is really good news for the industry.
The BSA Mortgage Instructions² have 31 lenders listed and a quick search of section D.12 for a random 16 of them, showed that only one didn’t accept search insurance under any circumstances -meaning, if these numbers are representative, that over 94% will accept search insurance of some kind. Again, great news.
Over the past few months, a number of lenders have changed their Part 2 Handbook instructions relating to the question “Does the lender accept search insurance, and, if yes, what are the lender’s specific requirements?” (Section 5.4.6 to be specific).
But ‘changed’ does not necessarily mean ‘changed’. Nationwide, for example updated their section 5.4.6 in January 2021– what did they do? The put a paragraph spacing in! However social media quickly picked up that Nationwide has changed their criteria – which they hadn’t. So beware of fake news!
If you want to see a summary of which lenders (UK Finance) accept search insurance and in which circumstances, follow this quick link: https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/2081/
For lenders in the BSA, an individual search by lender is required (Section D.12)
In conclusion, search insurance in many, many cases is a viable alternative/addition to undertaking searches, so it’s worth considering and checking with the individual lender.
Mandy Brown is Director of LawSure Insurance, the UK’s leading specialist independent broker in title insurance for solicitors and conveyancing practitioners. As an independent broker, LawSure has access to the whole title insurance market and can provide advice and a recommendation as to the most appropriate insurance for each client, free of charge.
For more information about their free broking service, call 01293 880700 or email LawSure at enquiries@lawsureinsurance.co.uk
- Live Survey undertaken by LawSure Insurance 2020
- https://www.bsa.org.uk/information/mortgage-instructions