Insolvency Act Indemnity Insurance - Consent Order

RibZed

Hi


My daughter is going through a divorce which includes agreement of a Consent Order to transfer the FMH into her sole name in consideration for an agreed sum of money.


Her conveyancing solicitor dealing with the TR1 has advised that what she is paying is less than 50% of the available equity within the property (reason being - she put all of the £50k deposit into the property) and so - as it is an undervalue - they have advised her that she needs to pay Countrywide Insurance £250 to protect the lender under the Insolvency Act. I have a few questions about this:


1. The solicitor has used the words 'less than the transferor would be entitled to' based purely on the available equity - surely this is incorrect given that the transferor was entitled to £50k less from the equity split as he put zero of the deposit in?


2. The solicitor has asked Countrywide to quote for the policy against the TOTAL MARKET VALUE of the house (£350k) and not the o/s loan (£167k) - why is this? Surely it is the sum that the lender is entitled to which the insurance is protecting, not the total value of the property?


3. Is this policy really needed when the transfer is dealt with via a court sealed Consent Order? How could someone taking action under the Insolvency Act ask for / expect all of the terms of that Consent Order to be undone by a court?


4. How much should these policies cost (assuming protecting £167k)?


I would appreciate any help that can be given.


Thanks

charlie792

if being transferred as per terms of a court order then an indemnity policy is not normally required.
it is normally viewed that the courts have examined the circumstances presented to them and the distribution of assets is fair in the circumstances etc, ie someone might get 50k off the value of the house but the other takes a 50k car, or in this instance as reimbursement for 50k the ex didn't put in

I cant comment on these solicitors reasons for requesting but where transfer at undervalue indemnity is required then it will usually be for the full market value, rather than any mortgage value.

I assume the solicitors dealing with the divorce are not dealing with the transfer?

£250 sounds about right for the value but it varies between providers

edited to add; if property is being transferred subject to a court order, this should be reflected in panel 8 of the Tr1. usually along the lines of "pursuant to a court order dated XX/XX/xxxx"

eddddy

charlie792 wrote: »

if being transferred as per terms of a court order then an indemnity policy is not normally required.
it is normally viewed that the courts have examined the circumstances presented to them and the distribution of assets is fair in the circumstances etc, ie someone might get 50k off the value of the house but the other takes a 50k car, or in this instance as reimbursement for 50k the ex didn't put in

I'm no expert on this, but I would think Insolvency Act Indemnity insurance doesn't relate to fairness of distribution of assets between husband and wife - it relates to depriving creditors.


e.g. The husband has huge debts (which he didn't disclose to the court), and is insolvent. If he is made bankrupt, his 50% share of the house will go to his creditors.

So the husband 'contrives' to get a divorce so that his 50% share of the house is transferred cheaply to his wife. So the divorce was just a mechanism to deprive his creditors, and benefit his wife.


i.e. Had the husband gone bankrupt first, then got a divorce, his creditors would have got more and his wife got less. And a creditor might challenge the 'under value' transfer on that basis.

But like I say, I'm no expert on this.

RibZed

Thank you both for your replies.

Eddddy’s point is (unfortunately!) very well made and it does make perfect sense. The only tricky element is that fact that it is ‘‘interpreted” as an undervalue. It would somehow have made more sense to not have an undervalue as part of the agreement and then formally get him to repay her £50k deposit after that split of equity. Then it wouldn’t be an undervalue?

Does seem odd that it’s the market value that is underwritten when it is only the loan amount which essentially needs to be protected; the policy is for the lender after all.

Anyway, thank you both again and I’ll post an update once resolved!

RibZed

Thank you both again for your responses

I’m pleased to advise that Charlie is correct and that the solicitor had overlooked the consent order (they had also completed a SDLT form too which I queried) - so the TR1 form is being re-prepared, I suspect with the text Charlie edited in above.

Good news all round, although the courts do seem to be taking an age to issue paper work following receipt of AoS’s

Thanks again

Rich