Freeholder insurance

Windsorcastle

I am the freeholder of a property which is divided into 2 maisonettes, and I live in one. The previous owner/freeholder allowed the other flat to arrange their own buildings insurance, however when I was buying my maisonette, my solicitor advised me that it is the freeholder's responsibility to arrange insurance for the whole property, and that I should do this and ask the leaseholder of the other maisonette for their share.


I have accordingly done this for the past 2 years, getting a block of flats policy. However, every time I get a renewal quote, the cost seems to be exorbitant.


Is there any reason why I can't revert to the previous arrangement and arrange my own insurance for my maisonette, and ask the leaseholder downstairs to do the same? If I get him to give me proof of sufficient cover, does that fulfil my obligations as freeholder?


I'm sure it would work out cheaper that way, and also, I would be protected from losing my no-risks bonus if the other flat needed to make a claim for any reason, rather than have a joint policy.

stator

No, the building itself needs to be insured. If the whole thing fell down, how would you claim to get it rebuilt if it's two different policies?
You need to insure the building structure itself. The leaseholders insure their contents.

Have you tried a broker who has knowledge of the freehold insurance market?

Windsorcastle

Thanks for the reply. All the companies I have spoken to say I need a 'block of flats' policy. Is this the same as freeholder insurance or something different?

Also, I am currently buying a first floor maisonette in a 2 flat property, which is in a small 1950s development of about 20 similar properties, and have been advised by the managing company that every maisonette has to take out separate buildings insurance for their own property. So wouldn't that be the same scenario if the whole building fell down?

da_rule

A flats policy should be the same.

Whilst the other leaseholder may have been arranging their own insurance, what matters is the lease. If their lease makes you, as the freeholder, responsible for insuring the building then you have to do it (you should be able to claim some of the cost back via the service charge). The leaseholder will not have a formal obligation to insure the building so could cancel their policy at any time. Therefore, if you don't do it, and the building gets damages etc you would be personally liable as you have failed to deliver your obligations under the lease.

Some leases do make each leaseholder responsible for arranging all insurances, but these are relatively rare.

You could ask the leaseholder to stop insuring the building. Otherwise, I believe insurance companies have policies for dividing costs between them when the same risk is insured twice.

eddddy

Windsorcastle wrote: »

Is there any reason why I can't revert to the previous arrangement and arrange my own insurance for my maisonette, and ask the leaseholder downstairs to do the same? If I get him to give me proof of sufficient cover, does that fulfil my obligations as freeholder?

So the leases makes you (as freeholder) responsible for adequately insuring the building.

If you make a legally enforceable agreement with your neighbour that they adequately insure one part of the building, and you adequately insure the other part - I guess you're covered.

But if your neighbour breaks the agreement (e.g. cancels the policy, under insures, gets the 'wrong type' of policy), and a claim fails, you will have to sue your neighbour - and they might not have sufficient assets to cover your losses.

Also, if you have a mortgage, your lender may not be happy with 'split' insurance.


In some circumstances, as a leaseholder, you can get "Contingent Building Indemnity Insurance" to cover the risk of others in a block not having adequate buildings insurance.

Maybe investigate "Contingent Building Indemnity Insurance" for your new flat as well.

Windsorcastle

Really helpful answers, thanks so much to everyone who responded for clarifying this, and I'll look into the things suggested.