Leasehold Insurance Requirement

gdn1947

Hi, One of the requirements of the lease on a property we are in the process of purchasing is that the home insurance policy is taken out in the names of the purchaser and the leaseholder. Why would the leaseholder want to be involved with the house insurance? I'd appreciate any comments as to whether this requirement is good, bad or indifferent. Thanks

kingstreet

Do you mean the freeholder?

You are/will be the leaseholder.

It's normally the freeholder's responsibility to insure the building. Flats for example, would be covered by a block buildings insurance policy effected by the owner of the building as a whole, not each individual flat owner, although each would contribute, normally via their monthly/annual service charge.

Properties on very long leases (my mother in law's 1900 terrace is leasehold on the residue of a 999 year lease) can often be insured by the leaseholder as the freeholder may hand such responsibility for them for ease of admin.

The bottom line here is the freeholder owns the land on which the property is built and at the end of the lease will own both land and property. It is therefore acceptable for the freeholder to be named as a joint applicant, or for its interest to be noted on the policy. In this way, the freeholder can be made aware of non-payment of premiums or any claims which may be made.

This is also a typical requirement of a mortgage lender accepting a property as security - leasehold or freehold.

gdn1947

Thank you for your reply. Sorry I got my leaseholder and freeholder mixed up! I take from your reply that we should have no undue concerns about the freeholders interest on the insurance policy.

kingstreet

It is unusual, but as mentioned I can see why it could be considered appropriate. I'd suggest a call to your solicitor and/or insurer, or potential insurer, to see what they think.

Is it a single, stand-alone property, or is it like a flat in a block?

gdn1947

Its a semi detached house on an estate where all the properties were initially leasehold (999 years). We understand that some owners have bought the freehold. Talked to the solicitor last evening and he is not overly concerned. It appears that we have to include the mortgage company as well as the freeholder on any insurance policy which I guess is reasonable as they both have an interest. Thanks again for your input