Leasehold buildings insurance issue - advice please!

sydenhambased

As some of you may know, I'm currently twiddling my thumbs while my solicitor plays paperwork ping-pong with our vendor's solicitor. Was hoping for a speedy exchange but that was 8 weeks ago.

The flat we're buying is the top floor of a two storey Victorian house, which was converted in the late 1980s.

The current draft lease is littered with typos, but the one real issue is the clause regarding Buildings Insurance. It stipulates that the Leaseholder must provide Buildings Insurance, NOT the Freeholder. There is a £300 annual ground rent (EA misrepresented and told us it was "peppercorn") but no service charge.

Our solicitor is contesting the Buildings Insurance clause, stating that it MUST be the Freeholder that takes out Buildings Insurance on the whole building, and he can then invoice the two Leaseholders for the cost.

I should mention that the Freeholder and current Leaseholder of the flat are the same person. He previously let the flat out, but has now decided to sell, but he's retaining the Freehold.

Last night I knocked on the door of the ground floor flat, and spent a good 45 minutes talking to the woman that lives there. Four years ago, when she bought, her solicitor had exactly the same issue, and in the end she's taken out a Buildings Insurance policy that covers her up to the value of £450,000 (which would actually cover more than the reinstatement value of the whole building). She has refused to pay ground rent to the Freeholder on the basis that he doesn't pay for the insurance.

Our solicitor is standing firm and saying there's no way round this - it HAS to be the Freeholder in order to fulfil the needs of our mortgage lender. I'm wondering if there's any other way.

We're not in a position to acquire the Freehold (for at least a year after we've lived there, legally) and we know the Freeholder is a PITA.

Any suggestions?

dacouch

Are you in Scotland?

sydenhambased

Nope, definitely England. South London to be precise.

Some background: the freeholder offered us the freehold on the building for £15k but we were advised the transactions would be linked and we'd then be eligible for an extra £5k SDLT (the flat's on the £250k threshold). We refused the freehold on that basis but think the freeholder's basically trying to pull a fast one and shirk all FH responsibilities without actually getting shot of the freehold title. The other leaseholder agrees...

G_M

Why not buy the freehold jointly with downstairs?

Incidentally

She has refused to pay ground rent to the Freeholder on the basis that he doesn't pay for the insurance.

won't stand up legally. If the freeholder took her to court, she'd lose. And if/when she sells, the freeholder will inform her buyer of the debt and the buyer will refuse to buy......

sydenhambased

I haven't seen downstairs's lease so I couldn't possibly comment on what it states!

We can't buy the freehold at this point as:
a) We haven't bought the lease yet, let alone lived there for a year (and it's no longer for sale)
b) We'd still end up paying extra stamp duty - the flat itself is costing us £250k on the nose, so a penny more and the stamp duty hikes.

I guess I'm really just trying to figure out if there's a way for leaseholders to insure the whole building INCLUDING the structural walls etc., without going down the Right to manage route or buying out the freehold.

Long term I very much see buying out the freehold as being the sensible option.

G_M

sydenhambased wrote: »

I guess I'm really just trying to figure out if there's a way for leaseholders to insure the whole building INCLUDING the structural walls etc., without going down the Right to manage route or buying out the freehold.

Of course you can.

Since you have already established a friendly relationship with downstairs, you can simply between you choose an insurer and insure the whole building, and split the premium in half.

Sorted.

sydenhambased

But how would we then fulfil our lenders' requirements, given only one of our names would be on the policy? And what happens if the structure of the building DOES get damaged by WW3 (or whatever) ? Surely we wouldn't then be able to claim for repairs to the external fabric as that's covenanted as the freeholder's responsibility. Or am I overcomplicating things?