Leasehold but each occupant separately arranges own buildings insurance?

Rfbs-01

Hi,

My partner and I are about to exchange on a leasehold property. It has about 960 years left.

We've been told that we have to arrange our own buildings insurance. It is a maisonette, 6 properties in one building (three up three down) all with own front doors. The copy of the lease appears to say that it is the freeholder's (two individuals) responsibility to insure and maintain the building, but apparently they don't. No one has mentioned that they are absent freeholders, though I haven't asked that question.

The solicitors have sent us a copy of the seller's current insurance policy, but it was a new policy from December 2016, so only a couple of months before he put it on the market.

The solicitor has not gone much into it, despite us asking several times, than to brush it off that it's not completely irregular for leaseholders to, separately and individually (not jointly) arrange their own buildings insurance, but I still have my concerns.

I have tried contacting the leasehold advisory service but not yet had a response, now the seller is saying we must exchange by 3pm Monday, obviously my partner is keen to and I sort of am too, but feel I have not had good answers to these concerns.

Please can anyone give any advice on whether it is normal for leaseholders to sometimes separately arrange their own buildings insurance and maintain the building, and if this is likely to have any effect when we come to sell it?

Many thanks

eddddy

Rfbs-01 wrote: »

The solicitors have sent us a copy of the seller's current insurance policy, but it was a new policy from December 2016, so only a couple of months before he put it on the market.

I'm not sure what point your making here. Insurance policies typically last for a year - so that aspect sounds fine.

Rfbs-01 wrote: »

The solicitor has not gone much into it, despite us asking several times, than to brush it off that it's not completely irregular for leaseholders to, separately and individually (not jointly) arrange their own buildings insurance, but I still have my concerns.

Whose solicitor - yours or the sellers?

Occasionally, leases require leaseholders to arrange insurance. But it's generally seen as a bad thing.

Rfbs-01 wrote: »

The copy of the lease appears to say that it is the freeholder's (two individuals) responsibility to insure and maintain the building, but apparently they don't.

If that's correct, it's extra risk buying a leasehold property where the freeholder is breaching covenants. If they can't be bothered to insure, they probably won't be bothered to maintain and repair either.

The leaseholders can take over the management, through Right to Manage - but that needs effort and commitment by the leaseholders.

It sounds like this property may give you more headaches than other properties might.

Rfbs-01

I'm not sure what point your making here. Insurance policies typically last for a year - so that aspect sounds fine.

Ok great, it was just something I noticed on the document, and that it was a new business policy rather than a renewal. But I may just be over thinking it.

Whose solicitor - yours or the sellers?

Our solicitors. May I ask why it is seen as a bad thing for leaseholders to arrange their own insurance?

I don't think the freeholders do care much about maintenance, although the survey did find some evidence of repairs, nothing related has come up in the conveyancing though.

eddddy

Rfbs-01 wrote: »

May I ask why it is seen as a bad thing for leaseholders to arrange their own insurance?

It's much messier. What if one of the leaseholders doesn't arrange buildings insurance, and the building burns down? There won't be enough insurance money to rebuild.

So you might have to take out a 'Contingent Building Indemnity Insurance' to cover yourself against that risk.

It will also probably be cheaper to have one block policy than 6 individual flat policies (plus the cost of 'Contingent Building Indemnity Insurance'.)

And it's much easier to keep tabs on one freeholder, than on 5 different leaseholders.

I'm slightly surprised that you solicitor isn't flagging this stuff up as a problem. Maybe he/she has more info about the situation that makes them feel more comfortable.

silkz

I live in a leasehold property and in hindsight wish I had never bought it. Freeholder needs to insure your building as a block policy and provide you with a policy document. Check you can contact the freeholder. Ours is in breach of varius lease covenants and has never done any communal maintenance since acquiring the freehold flat & 1 other, so we're in constant dispute over money...

bouicca21

I don't understand how individual leaseholders can each take out buildings insurance on their flats. My block is covered by a single policy, taken out by the freeholder. We are each responsible for our own contents insurance.

If the freeholder isn't doing something as basic as taking out insurance then I'd be seriously worried about discovering a sh!tload of other problems.

sparky130a

So how the flu5k does that work?

You each insure your own walls?

I'd be amazed that any insurance company would quote on this basis, even less so pay out any claim....

Alarm bells...

always_sunny

We do, each LH has their own policy - it is stated in the lease.
I don't understand what is the concern, I have a flat abroad and it's also done in the same way, each owner has their own policy, to me (maybe foreigner mindset) seems absolutely normal.

Hoploz

Who is the freeholder? Is it shared between the leaseholders?

You need to check whether it states in the lease that it should be arranged individually or whether it should be a shared policy (which indeed is much more common) If the freeholder isn't doing what they should do then a shared policy could still be put into place by the leaseholders themselves together. It's possible there's been a problem doing this and the seller just did what they were able to do in order to have insurance prior to sale. (Or it might just be that that was when it was due for renewal of course)

I understand it would be a requirement for lending that the whole building has a shared buildings policy, so you're right to check this out. Logically this is presumably so that if the building needs to be rebuilt for whatever rare and unlikely reason the lender has reassurance it is covered by a single policy rather than a bunch of insurers working separately.

If it does prove to be the case that insurance is arranged by individuals then your solicitor will run it by the lender (as they are working on their behalf as well) to check they are willing to lend in these conditions.

G_M

It's not that unusual for leaseholders to each provide their own buildings insurance. Either because that's what the lease stipulates, or because the freeholder is absent, or fails to insure, and leaseholders take over because it's 'easier' than chasing the freeholder.

But
* it's more expensive
* it can lead to arguments, and delays, between insurance companies if there's a claim, about which company pays how much
* if the leaseholder beneath you fails to insure, how does your insurer rebuild your flat above a burnt-out wreck that the leaseholder below cannot afford to rebuild....?

always_sunny

G_M wrote: »

It's not that unusual for leaseholders to each provide their own buildings insurance. Either because that's what the lease stipulates, or because the freeholder is absent, or fails to insure, and leaseholders take over because it's 'easier' than chasing the freeholder.

But
* it's more expensive
* it can lead to arguments, and delays, between insurance companies if there's a claim, about which company pays how much
* if the leaseholder beneath you fails to insure, how does your insurer rebuild your flat above a burnt-out wreck that the leaseholder below cannot afford to rebuild....?

Isn't that what the FH does though (in my case) they request the policy to be with either one of their 'approved' brokers or with another one though in that case I must provide them the certificate and the FH will endorse at a cost every year.
If the flat (insured for £x for lending purposes) damages other flats, that will cover the mortgage, then Public Liability will cover damages to others. (Public liability is min £1M).