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We look at some of the most common questions posed to our underwriters.

Q: I am dealing with a property where the plan forming part of a previous deed is missing. Do you offer a policy to cover this?

A: The simple answer is yes, but…

Missing deed plans affect transactions involving both freehold and leasehold properties and we are often approached to provide cover in these situations. Our first requirement is to understand the issue that could arise because of the missing plan and then assess how this could lead to a policy holder suffering a loss. For example, it may not be possible to correctly identify the full demise of the property on a lease plan, because the copy of the plan hasn’t been coloured in. In this scenario, our missing lease plan policy provides protection should a third party come forward to challenge the ownership of the property. In some leases, the plan may have identified the location of communal areas used to benefit the property, such as a bin and cycle store. If the lease plan is missing, the legal rights granted to use the communal areas will be ineffective, and cover will be required in case the current freeholder or the management company prevent the use of these areas.

Alternatively, a previous deed plan may be missing for a freehold property. If this was used to identify the extent of a right of way being granted by the seller over the private access serving the property, this may mean that the rights are ineffective as the precise access route is unclear and the current owner of the access may seek to prevent use in the future. In other scenarios, it may be uncertain which part of the property is affected by any freehold restrictive covenants that have been imposed, leading to a risk that a third party may attempt to enforce the covenants for a past breach at the property – either due to alteration works, a change of use of the property, or both.  

These are just a few of the examples of where we can assist if a previous deed plan is missing. As underwriters, the fact that a plan may be missing is just the start of the issue. We need to understand the wider context of what the plan was being used to define to then select the right policy to cover this situation.

Q: What is the difference between the Housing Act policy and missing mortgagee protection clause policy?

A: Both policies address different reasons that can lead to the forfeiture of a lease by the freeholder of a property, due to the lessee failing to act in accordance with the terms laid out in the lease. 

Our Housing Act policy is designed to protect a lender should a landlord unexpectedly issue an eviction notice, rather than initiating the usual forfeiture proceedings, due to non-payment of the rent stated in the lease. It covers the risk that borrowers with a lease where the annual ground rent exceeds £250, or £1,000 in Greater London, can be evicted using the much quicker process permitted for assured short hold tenancies under the Housing Act, rather than the traditional forfeiture route.

Conversely, our missing mortgagee protection clause policy protects lenders if they aren’t given notice before a landlord forfeits a lease, due to a breach of covenants occurring after the mortgage has been granted. In this situation, lenders would ordinarily expect to be notified if a landlord issues forfeiture proceedings and repossesses a property. However, if the lease doesn’t contain a mortgagee protection clause, the landlord does not legally have to notify them of their intentions. Consequently, the lender may be unaware of the forfeiture proceedings and therefore unable to respond and claim relief from forfeiture – putting them at real risk of a financial loss under the mortgage.

Although the two scenarios are separate, it’s quite common for the lease of a property to be affected by both issues. That’s why we provide a combined Missing Mortgagee Protection Clause and Housing Act policy for the lender, alongside the individual policies.

Looking to the future, the draft Commonhold and Leasehold Reform Bill is intended to overhaul the traditional leasehold system and we will continue to monitor the impact of any future legislation and adapt our policies accordingly. For now, the current issues relating to defects in a lease, or leasehold properties in general, will continue to present problems for buyers and their lenders some time.