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    • bowcreek
    • By bowcreek 22nd Sep 16, 11:31 PM
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    bowcreek
    Period conversion - 2 flats - Best option for insurance
    • #1
    • 22nd Sep 16, 11:31 PM
    Period conversion - 2 flats - Best option for insurance 22nd Sep 16 at 11:31 PM
    Hello fellow members. Please can I seek your opinion on below?

    Getting close to exchange of contracts for our purchase of a ground floor flat in a Victorian house converted into 2 flats (both with separate entrances). The flat above is tenanted.

    we will have a leasehold title (900 years lease) and will own the freehold jointly with other co-freeholder.


    In terms of insurance requirements, lease of both flats state they need to insure jointly.

    Seller who bought this flat 8 years back in cash tells that him and flat above has been insuring separately (haven't shown the evidence yet). I know having 2 separate policies aren't ideal for such arrangements. So what do you think my best option would be? Please do feel free to suggest one which I might not have covered below.

    1. Buy separate policy / Carry on with seller's insurance provider and transfer his policy to myself (things to check would be but not limited to amount of cover, claim history etc,) + Contingent building insurance (Approx. 300)

    2. Buy separate policy / Carry on with seller's insurance provider and transfer his policy to myself, then after completion try to convince co-freeholder to buy block insurance. Cancel mine and his if he agrees. If he doesn't - carry on my separate insurance and buy contingent (I hope my solicitor can buy that after completion too).

    3. Not sure if I can, but my solicitor says being holding freehold jointly, I can insure the whole building myself without co-freeholder's consent as such. Is it possible? What is he has a separate policy which means dual cover, at time of claim - possible issues? I'd have to ideally buy block of flats insurance to cover correctly and I assume his consent is needed?

    Does this Contingent insurance worth having? I hope its just not words written on piece of paper and when real need comes in, its worth nothing? Has anyone had unfortunate reasons to ever bring them to use please?

    I'm really confused about what should be best way to deal with this and seeking help in way forward.

    thanks.
Page 1
    • eddddy
    • By eddddy 23rd Sep 16, 7:32 AM
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    eddddy
    • #2
    • 23rd Sep 16, 7:32 AM
    • #2
    • 23rd Sep 16, 7:32 AM
    As you suggest, the best solution would be for you to insure jointly as freeholders - as required by the lease.

    Once you own the lease, you can take steps to make this happen, if you want - by serving notices. However, serving notices on your joint-freeholder may not be the best foot to get started on with your new neighbour.

    Is this insurance situation an indication that the joint freeholder is generally an unreasonable person? That may be a bigger problem than anything else. Because you'll probably need to cooperate on other stuff in the future.
    Last edited by eddddy; 23-09-2016 at 10:25 AM.
    • bowcreek
    • By bowcreek 23rd Sep 16, 12:31 PM
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    bowcreek
    • #3
    • 23rd Sep 16, 12:31 PM
    • #3
    • 23rd Sep 16, 12:31 PM
    As you suggest, the best solution would be for you to insure jointly as freeholders - as required by the lease.

    Once you own the lease, you can take steps to make this happen, if you want - by serving notices.
    Originally posted by eddddy

    I take that can only happen after completion? How should we best insure meanwhile i.e. before exchange till the time we get into agreement with jointly insuring. Also that might not happen at all, so that arrangement we make needs to be something which we can carry on with if we can't get it jointly insured. Don't want to take the serve notice route right from beginning.
    • eddddy
    • By eddddy 23rd Sep 16, 1:46 PM
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    eddddy
    • #4
    • 23rd Sep 16, 1:46 PM
    • #4
    • 23rd Sep 16, 1:46 PM
    TBH, if it were me, I would start by saying this to the seller:


    "I'm not going to buy your flat until you sort out the insurance issue with your joint freeholder, and get a single insurance policy for the whole building...

    (and maybe)

    ... plus you need to arrange a deed of trust with your joint freeholder that states how buildings insurance and other 'freeholder matters' will be dealt with in the future."



    Otherwise, you're buying yourself into a messy situation - and you'll have to get specialist insurance and indemnities until it's sorted out. (Personally, I would expect a discount on the price for the hassle of dealing with this.)
    • bowcreek
    • By bowcreek 23rd Sep 16, 1:51 PM
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    bowcreek
    • #5
    • 23rd Sep 16, 1:51 PM
    • #5
    • 23rd Sep 16, 1:51 PM
    We had the place undervalued by mortgage valuer 15,000 and seller had to agree to it. Its because of this discount, they aren't much keen to negotiate any further.


    I'd thought lease defines how those matter need to be dealt with? Both flats have same lease content. What is deed of trust for?
    • eddddy
    • By eddddy 23rd Sep 16, 2:06 PM
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    eddddy
    • #6
    • 23rd Sep 16, 2:06 PM
    • #6
    • 23rd Sep 16, 2:06 PM
    A lease is a 'contract' between leaseholder and freeholder.

    A deed of trust is a 'contract' between joint freeholders.

    It would be intended to prevent disputes between the joint freeholders (like disputes about how the property is insured).
    • bowcreek
    • By bowcreek 23rd Sep 16, 2:22 PM
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    bowcreek
    • #7
    • 23rd Sep 16, 2:22 PM
    • #7
    • 23rd Sep 16, 2:22 PM
    OK. But in this case we also hold freehold. I thought both leaseholders will follow covenants enforced under their lease. Not sure who the lessor technically is in such arrangement.
    • bowcreek
    • By bowcreek 23rd Sep 16, 4:08 PM
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    bowcreek
    • #8
    • 23rd Sep 16, 4:08 PM
    • #8
    • 23rd Sep 16, 4:08 PM
    Just because we like this place and would want to go ahead, I am getting inclined towards option 1 or 2.


    Do the indemnity insurances like Contingent building insurance appear as anomaly when selling a property? So if we end up not able to sort out block insurance and decide to buy our own flat's insurance + Contingent insurance, will this look bad to future buyer in real world?


    Have you heard of contingent insurance being put to use for claim by anyone on this forum or elsewhere?
    • eddddy
    • By eddddy 24th Sep 16, 11:05 AM
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    eddddy
    • #9
    • 24th Sep 16, 11:05 AM
    • #9
    • 24th Sep 16, 11:05 AM
    You're missing the real point.

    Big alarm bells should be ringing in your head...

    Two people (i.e. the current leaseholders / joint freeholders) are failing to cooperate on a really simple task - arranging a block insurance for their building.

    They are both breaching the terms of the lease.

    Why are they failing to cooperate? Is there a feud between them? Is one or both of them a 'problem case'?

    Do you want to buy into a feud situation, or become a joint freeholder with a 'problem case'?



    As I suggested earlier, you need to find out what the problem is and see if it is rectifiable before buying the flat.
    • bowcreek
    • By bowcreek 24th Sep 16, 11:22 AM
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    bowcreek
    I get your point. But what seems to be happening is seller never realised the need of being so aware about importance of jointly insuring probably being a cash buyer as initially they said they dont have any insurance, but later realised they have been paying annually via direct debit to M&S. They seem to now think that why should they sort it out as they are selling the flat and hence there is no point to them. To be honest I am yet to see their copy of insurance they have, if they have one. Is it okay to speak to co freeholder before exchange ? What is the best way to get his details and to contact him.
    • G_M
    • By G_M 24th Sep 16, 1:36 PM
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    G_M
    ...
    Getting close to exchange of contracts for our purchase of a ground floor flat in a Victorian house converted into 2 flats (both with separate entrances). The flat above is tenanted.
    Originally posted by bowcreek
    Who/where is the landlord / leaseholder / joint freeholder?

    The best solution is a conversation with that person. You'll

    a) find out if he's receptive to the idea of a single insurance policy in future and

    b) find out if he's likely to be cooperative/obstructive generally with freehold matters
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