The responsibility for insuring a residential block is dependant on the terms of the lease. A leaseholder is therefore recommended to consult the lease. Often the responsibility falls to the Freeholder, or the Residents Management Company may be obliged to insure with an insurer nominated by the Freeholder. The cost of the insurance is then apportioned and passed onto leaseholders as part of the Service Charge.
At present any commission or “kick-back” paid to the Freeholder by the insurance company does not have to be declared. Unfortunately this is a common practice and the RICS estimate that about 60% of all block insurance premiums are inflated in this way. When we have taken over as Managing Agents we usually find that we are able to arrange like for like insurance cover at a considerably lower cost.
The only way at present, to determine if the premiums are excessive is to request details of the current buildings insurance and obtain independent quotes.
Alternatively leaseholders do have the right to place insurance if they exercise their Right To Manage.
How to obtain details of insurance:
Leaseholders are entitled under the Landlord and Tenant Act 1985 for information about buildings insurance. A leaseholder may write at any time to the Freeholder or Managing Agent for information about the insurance.
The leaseholder may request either:
- a summary of the insurance policy including the name of the insurer, the sum insured and the insured risks.
- to go to the office of the Freeholder or Managing Agent and inspect the policy and related documents including proof of payment and to take copies
- copies of the policy and related documents to be sent to the leaseholder or be made available for collection
For any of these written requests the Freeholder or Managing Agent has 21 days from receipt of the letter to comply. The agent can charge for copies but not for inspecting.
Where a Freeholder or Managing Agent fails without reasonable excuse to comply with either a request for insurance details or to inspect or have copies of the relevant policy or associated documents, they commit a summary offence and are liable for a fine of up to £2,500 (level 4 on the standard scale) on conviction. Any prosecution must be presented to a magistrate within 6 months of the commission of the offence.