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Home -> Freehold Insurance Information

Does your Freehold owner direct your Insurance?

There has been a lot written recently about very high insurance premiums being charged as a result of Freeholders having the right under the terms of lease to direct the placement of insurance on leasehold property.

Whilst there are a couple of well documented cases of 'rip off' insurance premiums, on the whole, it is fair to say that there is generally a complete lack of understanding of what is a 'fair premium' for an individual leasehold property.

This is due to a number of factors, including the sheer number of variations in flats and houses, and the facilities the insurance has to cover.

Some flats are part of buildings that are very basic, part of a building with limited or on street parking. Whilst many new flats have larger communal areas, grounds, lifts, car parks and even a gym and swimming pool.

In certain parts of the UK, many Leasehold houses are listed properties and this factor alone does not allow comparisons with quotes from a 'one size' fits all direct insurer online system.

What can you do to establish if you are paying a 'fair' premium?

1) Seek alternative quotations from a leasehold specialist (like Brevent Insurance).

• Remember, if you live in a flat, this must be for the whole property and associated communal areas.

• Be prepared to provide details of any claims made in the past few years. This will be available from your Insurance broker.

• Provide a copy of the current insurance documentation to the quoting broker. This helps identify anything unusual or special conditions about your property.

This will give you an indication of how it compares. Don't be surprised if your current insurance is actually very good value.

2) If the alternative quotation/s is/are more than 10% lower than the current insurance arrangements, meet the requirements of the lease and any fellow leaseholders mortgage companies, then here are some options to explore.........

LEASEHOLD HOUSE

If you live in a Leasehold house (not split into multiple flats), you can exercise your new rights under the Commonhold and Leasehold Reform Act 2002 and take up your alternative insurance quotation at the appropriate time by serving notice to the Freeholder in the 'prescribed manner'. Follow this link to the relevant section of the Act.

 

LEASEHOLD FLATS

Due to legal confusion about the definition of the term 'House' under the terms of the various Acts', we are not aware of anybody successfully setting the precedent for the term 'House' (yet) to cover Leasehold Flats in relation to this section of the above Act.

 

Therefore the least legally expensive routes open to you are:

 

1) Put the alternative quotation to the Freeholder or Managing Agent and establish their willingness to have their broker try and close a large gap in the premium. If the insurance is due for renewal soon, the broker should issue you a renewal notice at least 21 days before the renewal date (if it's not forthcoming, ask for an explanation why).

 

2) If the Freeholder declines and the gap is greater than 10%, then you could consider going to a Leasehold Valuation Tribunal. They will weigh up the case and may direct the parties involved to:

a) close the gap with comparative premiums

b) use the alternative quotation

Depending on the structure of your lease, there are alternative approaches that can also be taken to secure the right to place the insurance without freeholder intervention.

 

One piece of important feedback. ALWAYS pay the Insurance premium/rent, even if it feels high. DO NOT withhold premiums as you may end up not having ANY insurance.

 

It's probably much less trouble to seek a refund, than to have to contribute to an insurance loss OR even face legal/criminal action for failure to have legally required insurance in force.

 

Please do not hesitate to contact us to discuss this area of insurance, email enquiries to: freehold@brevent.co.uk