Buildings Insurance for a Leasehold Flat

Monkey_Speaks

Hi all,

I am in the process of buying a leasehold flat. My solicitor tells me that the property must have a buildings insurance policy in place before the bank will issue the mortgage.

The seller does not have such a policy and, by consequence, is in breach of the lease. Speaking to the management company, they told me that I could not take out a policy with them as I do not own the building. Unfortunately, the seller does not seem overly keen to take out insurance on a property he wants rid of.

Has anybody experienced this problem before? Any advice gratefully received:)

Rob

GarySt_2

Rob
The buildings insurance on leasehold property is sorted out by the management company. You cant insure only they can as you cant have individual policies for each flat. The whole block has to be insured as one. Your solicitor knows this and should be guiding you or doing it himself. Phone your management company, ask for their insurance department and ask for a copy of the policy to be sent to you. It will be stated in your lease that is to be arranged by them or sometimes the Freeholder.
Good luck
Gary

Richard_Webster

I am in the process of buying a leasehold flat. My solicitor tells me that the property must have a buildings insurance policy in place before the bank will issue the mortgage.

I suspect your solicitor means that he has to check that the landlord/management company has a policy in place. If the seller hasn't got any insurance it is most likely because the landlord has a block policy.

Mum_of_3_3

I manage the day-to-day running on our flat management co every year the management company pay for buildings insurance (which is covered by our maintenance payments) and each flat owner has to buy their own contents insurance.

When a flat has sold in the past I have had to send a copy of the insurance certificate to the buyers solicitor.

If for some strange reason the management company doesn't have insurance on the building then I would steer well clear

M_o_3

Monkey_Speaks

Hi M_o_3, thanks for your post. It is reassuring to know that you have to send on a copy of your insurance certificate. My solicitor is demanding such a document but the other side are not complying as yet.

Gary and Richard - the management company offers buildlings insurance, however, there is a clause in the lease that states the leaseholder can arrange his own policy. The problem is, the leaseholder has not paid the management company any premiums and has not set up his own policy. So, there is no insurance document to pass on.

I guess my question is, why does the bank need to see a buildings insurance certificate before issuing the funds?

GarySt_2

This sounds very unusual. I would be interested to see the wording of the clause in the lease. I cannot understand how a building can have more than one policy unless they are just refusing to provide the document while awaiting payment. If this is the case the solicitor will need to sort this out so payment is made by the seller to release it.
The bank doesnt want to purchase a property until it knows its investement is protected by insurance.

Richard_Webster

I guess my question is, why does the bank need to see a buildings insurance certificate before issuing the funds?

What happens to the bank's security if the building is destroyed and there is no insurance? You don't pay the mortgage and they repossess whatever's left of the flat and sell it for ....peanuts? Pretty obvious isn't - why they want to make sure it is insured?

If the lease gives a choice about whether the lessees have the management company's insurance or their own then that's a source of worry because you will not know whether or not the other flats are insured. If you can take out your insurance then you could do that from exchange of contracts yourself and that might well satisfy the lender. If you are buying a freehold house you do not orally need to know about the seller's insurance because you start your own on exchange - if you can do so here it would be the same.

By the way what kind of a building is the flat in? Is it in a purpose built block, a converted house or a purpose built maisonette (i.e. separate outside doors - building at quick glance looks like a semi detached or terraced house)?

carlaeliza

I have a lease hold flat and have owned it for 5 years, I was told when i bought it that i'd need to pay buildings insurance and organise that, so i always have. I also paid insurance through the maintenance company. Tesco who insure me never once questioned me getting buildings insurance on a flat even though they know the leasehold status ect, and now, when i tried to renew via a new quote they flash up that you dont need buildings insurance for a flat!!!! So for 5 years ive been throwing money away, and i doubt im the only one, so my question is, can i do anything about this?! My whole situation with this flat has been a misselling nightmare and only now am I realising how much i have been paying out for no reason~!

westv

carlaeliza wrote: »

I have a lease hold flat and have owned it for 5 years, I was told when i bought it that i'd need to pay buildings insurance and organise that, so i always have.

Who on earth told you that?!



It's not just leasehold flats that can have group insurance for the entire bulding, true freehold flats can too.

Mrs_Z

As far as I understand it, it's the freeholders responsibility to arrange building insurance. If the block is managed by a management agent appointed by the freeholder, then the managment agent would organise the cover. Proportional cost is then normally issued for each flat and paid for as part of the service charges.

Building cover is for the building (think of the external parts; outside walls, roof, etc) as well as communal areas only, and would not cover the 'insides of the flats' - hence it'd be up to the leaseholder to arrange their own cover for their contents, etc if they so wish.

kingstreet

carlaeliza wrote: »

I was told when i bought it that i'd need to pay buildings insurance and organise that

By whom?

The only person who could correctly explain the insurance situation to you was your solicitor.