2 Questions on Home Insurance

Cardinal-Red

Hi there - we live in a purpose built block of 4 flats, constructed 2005 and covered by 8 years of NHBC certificate.

Our buildings insurance is up for renewal. In the last 12 months, control of the management company which runs the property has been passed to us (the residents) each holding 1 share of 4 in the company; the freeholder holds no interest in the company.

My 2 questions are:

1) Do the individual flats even need buildings insurance? If something went wrong, would the NHBC certificate not cover remedial work?

And

2) If we do need it, is there any reason why we must purchase a buildings policy for all 4 flats through the management company - rather than, say, each owner buying their own buildings insurance.

I ask 2 because it may be cheaper to combine buildings/contents insurance for individuals - but don't want to suggest it at the meeting (tonight!) if this is illegal or will lead to problems.

Thanks for any help people provide....

maclean2

As far as I remember (It's a few years since I dealt with house insurance) NHBC cover excludes anything covered by a standard buildings policy.

It is probably cheaper to cover the four flats under one policy rather than four separate ones.Don't forget that mortgage lenders will insist on buildings cover being arranged.

Cardinal-Red

I think you're right about the buildings insurance being cheaper for a block of 4 together - but I was thinking of the discounts available for buying combined cover, as well as cashback from quidco etc.

For example our contents insurance is £200 each (roughly).

It might be £250 bought seperately, but I'll get £100ish cashback from Quidco, and also a discount on contents insurance.

Thanks for clearing up the NHBC issue also...

courtjester

Yes you must have buildings insurance - if the property burns to the ground, the NHBC won't help you.

Also, apart from the cost issue, there is an issue over the insurable interest in the building - themanagement of the building has passed to you from the freeholder, which suggests that the 4 owners are now self-managing the freehold.

If you set up (or continue) a management company, it is appropriate for the insurance to be in the name of the management service, with if appropriate the various interests of the leaseholders noted on the policy. If the lease covers these interests, then it only needs to be in the name of the management company which notionally owns the freehold for you.

The problem with separate buildings policies, is that it won't cover the actual interests of the owners properly - the insurable interest arises from the legal ownership as stated within the lease, hence an individual flat owner in theory doesn't have a legal interest in the building structure and common parts other than through shareholding in the management company (a different legal interest to occupation of the flat).

You might have problems of distribution of a serious insurance claim for example if the policies are not all on the same basis or even with different insurers.

The easiest option is to insure the building in the name of the (new) freeholder being your management company or organisation set up to administer all the common areas of interest.