Leasehold Property Building Insurance

krco86

Hi all,

I bought a flat 6 years ago that is a leasehold property and have to pay a lease fee and management charges which includes buildings insurance as part of the lease.

The flat is only a small 2 bedroom apartment which is actually a flat above a garage (FOG) so isn't part of a building block and has its own entrance etc.

I was paying the freeholder £74 a year in buildings insurance for 4 years at which point the building company sold the lease to another freeholder.

This freeholder has re-evaluated charges and sent me a bill which was reasonably similar to previous other than building insurance had gone up from £74pa to £520.

I have been challenging this for 15 months now and they have finally sent me an insurance certificate from Zurich stating that they paid £406 and are now asking for this price.

I have challenged further as searching myself I can get insurance from £54-185 on comparethemarket.

They sent further details and it turns out that the freehold company have told another management company (who deal with the insurance) that the cost to rebuild my property would be £311,995.

I bought the property 6 years ago for 131,995 and would estimate that property price hasn't really changed in the area (zoopla suggesting £143,000).

I have questioned the rebuild cost as my understanding is that rebuild would, in most circumstances, be less than the property value as the property value includes the cost of the land too.

The freeholder are not willing to re-evaluate the property and believe that it would cost £311,995 to rebuild. I have been on Zuirch's website and when I type in my house number and postcode the estimate comes up suggesting rebuild cost of £130,000 and a premium of £114 for the year. I sent this to the freeholder who said I got the £114 quote based on me suggesting it would cost £130,000 to rebuild but I didn't that was what Zurich site suggested I got a quote based on.

Does anyone have any experience or advice on this, I have now told the freeholder that I am not willing to pay that amount and that I am going to contact a solicitor to sort this out for me otherwise my insurance will continue to be £400pa instead of around the £100 mark.

Any advice, tips or help would be greatly appreciated.

Thanks

G_M

The difference between market value (what someone is willing to pay to buy) and rebuild cost (what it wost to demolish, re-design and rebuild) it not as simple as you suggest.

Additionally, what does the insurance cover? Your flat + the garage? Who owns the garage? Do they contribute to the insurance, and if so, is the £406 the total premium or just your share?

I also womder how you got the £130K rebuild cost you did from Zurich? Was this based o the building? Or your flat only? What inputs did you provide for this figure to be generated? Flats are not as simple as houses to arrive at re-build cost.

If you seriously want to contest the insurance premium, based on the re-build cost, I suggest you will need an RICS surveyor to provide you with a rebuild cost in a written report.

krco86

Thanks for your reply.

The garage belongs to a neighbour who is paying a lease fee too for the garage so I assume the £406 they want from me is just my share.

The £130,000 was estimated by Zurich based on the information I gave to Zurich which was that it was a flat and my post code and house number.

I appreciate it may cost more etc due to the garages below and these would need to be factored in the overall build cost but the owner of the garage should be responsible for that just like the attached neighbour would be responsible for their property.

My argument is that the whole lot may cost £311,995 to rebuild (I still dispute this as my property and my neighbours house sold for £200,000 therefore the building company must have made serious losses if two semi detached properties and one garage underneath cost in excess of 311,995 to build) but surely i should only pay the share of rebuilding my part?

There is a block of flats behind mine that they are saying would cost 2.2million to rebuild with an insurance premium of £2800 in total but each flat only contribute £150 per year - their share, surely mine should be the same and that I pay the share of my "bricks" if you like and the garage owner pays their element?

krco86

I have found a document from when I bought the property which is from NHBC for a 10 year period (Dec 2010 - Dec 2020) which is an insurance certificate and states on it that Maximum Insured Value of 131,000.

Does anyone know if this was the original survey done when the house was built (I bought it as a new build)?

Thrugelmir

Exactly what does your building consist of. A 2 bed apartment must be above more than a single garage.

krco86

1 single garage and two open tunnels to a car park.

The NHBC document to my limited knowledge was 10 years warranty on any structural damage to the building due to poor build etc?

If this is the case and they have insured a maximum value of £131,000 then this must have been done by RICS?

G_M

Yes I imagine the NHBC certificate s say that the rebuild cost was 131K in 2010. There are websites where you can input this to calculate how much the rebuild cost would have increased in the last 7 years.

So you are not taking about insurance for a flat, it is a policy to cover a flat, a single garage, and 2 tunnels.

You are still simplifying the relationship etween market value/rebuild cost. There are many variables

* location affects market value hugely.
* location affect re-build cost too, though in different ways
* rebuild cost is not just land plus market value of property. If your flat burned down, there would be cost of demolishion and site clearance; architects fees etc as well as the obvious construction costs. If it's over an access route (tunnel) there might be additional costs to maintain other people's access during the rebuild proces.....

I'm not saying you are not being charged a lot (you are), perhaps even being over-charged, but equally you are over simplifying the basis of insurance.

krco86

Thanks G_M for your advice.

I feel a little better that I have found the NHBC document and hopefully this will help getting the freeholder to re-evaluate the rebuild cost or if the cost is accurate then the percentage I should be paying instead of the full cost of the insurance.

As I say, the original freeholder only charged me £74 a year for 4 years so I can't see how the new freeholder can justify upping this to £406 a year.

eddddy

A couple of suggestions...

1. Ask the freeholder for evidence of the rebuild cost. (e.g. Was it calculated by a surveyor?)

2. Check your lease to see what proportion of the insurance premium you should be paying.

A freeholder's insurance policy is different from a owner/occupier's building insurance - so you can't usually get online quotes. You usually have to go to a broker.


If you can provide 'hard evidence' that the insurance you're being asked to pay is unreasonable, you can go to a first tier Tribunal.

(TBH, the fact that it has just gone up probably isn't good evidence. It could be that you were previously underinsured, and/or being undercharged.)