Indemnity Insurance due to Gift

davidmcn

nuuki9 wrote: »

Who does one complain to about such things?

In the first instance, you follow the firm's own complaints procedure. That might make them sit up and take notice, or at least get a second opinion (and as a conveyancer, I agree they're misintepreting the CML Handbook).

jdrummer

As was mentioned it seems near impossible to get nationwide to send a letter to the solicitor saying the policy is unnecessary. Unfortunately I need to complete pretty soon so am not really in a position for a drawn out battle through complains procedures etc. I would however like to get the policy myself to avoid the £150 solicitor fee but it seems like you need a solicitor to set up the policy?! Does anyone know how or who I could get the policy from without such a big fee? The fees more than the insurance!!

Midnight_Tboy

hi all....came across this whilst searching for other info. I'm curious....are there any updates to this....were you forced to splash out the cash in the end needlessly or did they eventually back down?

Richard_Webster

Is this a biggish firm or a re you dealing with one of the partners of a small firm. If a larger firm then the boss may not like it if his firm is dragged through the complaints procedures. He may look the point up and tell his junior that you are dealing with to back down.

In any event I would write to the practice and ask them to explain why they consider that a gift from family towards the purchase price affects the title of the property being purchased. Tell them that a number of other solicitors you have consulted believe that they are wrong. If the matter proceeds you could pay the money under protest and then make a complaint - although to be honest this borders on professional negligence because they are making you spend money unnecessarily.

To make a complaint you ask for details of their complaints procedure. (With most firms even asking for details of the complaints procedure causes them to think again!)

You then make the complaint and they have a reasonable time to seek to resolve it - usually by backing down and offering to pay for the extra cost. If they do not do so then you can go tot he Legal Ombudsman. The practice then has to spend ages filling in all their forms etc explaining what happened and it is usually better for them to back down rather than waste time on the form filling etc.

dcrnj

I took your advise and this is the reply I got? I am now stumped.

Dear Mr .......

This part of the CML handbook needs to be read in 2 different sections

a. That’s the transaction is subject to a deed of gift; or;
b. That there has been a transfer at an undervalue in the last 5 years.

We are referring to the former and not the latter.

You are receiving your deposit by way of a gift. Should that person become insolvent within the next 5 years, a trustee in bankruptcy could try and claw back the money. This could potentially affect the lenders security over the property and so this is why indemnity insurance is required to protect the lenders interest in this eventuality.

We have to sign a certificate to the lender prior to completion that the title is good an marketable. Without the insolvency indemnity insurance we cannot sign such a certificate to your mortgage lender.

In a purchase transaction we act for both the borrower and the lender. If you are unable to agree to us acting in accordance with the lenders instructions we find ourselves in a conflict and would have to cease acting for the lender. The lender will then appoint their own solicitor to act for them. This would be at your additional cost. All information on the financial aspects of the transaction would need to be provided to that solicitor for them to advise the lender accordingly.

The deed of gift is also a way of protecting your interests as it sets out that money has been gifted (for future evidence).

You have engaged this firm to provide you with appropriate advice to purchase a property and protect your interests. If you are not able to accept the advice that we are providing then sadly we must decline to act for you.

Richard_Webster

If the person making the gift of money were to go bankrupt within 5 years I suppose the trustee in bankruptcy might try to claw back the money from you, but they would be in no better position than any other unsecured creditor. It simply wouldn't have any effect in the title and the lender's mortgage security on it.

The donor could have said they were giving you enough to buy a shiny new car. Taken logically using that kind or argument any gifts made to a person who happens to be buying a house would have to be considered. Who paid for your holiday the other year? That could have been a gift from someone.

The solicitor is saying the case falls within the clause about the transaction itself being subject to a deed of gift. Where's the deed? Did the donor make out a deed just to transfer some cash to you? Of course they didn't.

The solicitors are talking rubbish. They are confusing the fact that many lenders want to know about the source of funds for the purchase - because it could relate to your ability to save and budget and your future ability to pay the loan - with the quite different issue about a transfer of the actual property for no value or less than its true value.

dcrnj

Richard_Webster wrote: »

If the person making the gift of money were to go bankrupt within 5 years I suppose the trustee in bankruptcy might try to claw back the money from you, but they would be in no better position than any other unsecured creditor. It simply wouldn't have any effect in the title and the lender's mortgage security on it.

The donor could have said they were giving you enough to buy a shiny new car. Taken logically using that kind or argument any gifts made to a person who happens to be buying a house would have to be considered. Who paid for your holiday the other year? That could have been a gift from someone.

The solicitor is saying the case falls within the clause about the transaction itself being subject to a deed of gift. Where's the deed? Did the donor make out a deed just to transfer some cash to you? Of course they didn't.

The solicitors are talking rubbish. They are confusing the fact that many lenders want to know about the source of funds for the purchase - because it could relate to your ability to save and budget and your future ability to pay the loan - with the quite different issue about a transfer of the actual property for no value or less than its true value.

Thanks Richard,

I have forward on to them this explanation and cc'd in their managing partner, I will wait and see what they come back with. My mortgage broker has advised me that the lender is willing to accept a letter from the gifting party stating it is a gift but the solicitor is adamant they want this indemnity insurance, 6 months bank statements, identification, a utility bill and an extra cost to carry out bankruptcy searches. I've also requested a copy of their complaints procedure.

davidmcn

dcrnj wrote: »

the solicitor is adamant they want this indemnity insurance, 6 months bank statements, identification, a utility bill and an extra cost to carry out bankruptcy searches.

The bank statements and ID are reasonable (they need to be satisfied for money-laundering purposes whose money it actually is), but as I said above, the rest of it is nonsense.

dcrnj

davidmcn wrote: »

The bank statements and ID are reasonable (they need to be satisfied for money-laundering purposes whose money it actually is), but as I said above, the rest of it is nonsense.

Yeah for sure, I have no problem with those and I'll happily supply them, it's all this other nonsense. :-)

Thrugelmir

Put the matter in context.

What's the purchase price of the property?

How much is being being gifted?

How much is your own deposit?