Common Part Insurance

InLoneShadows

Hello,

Your advice would be greatly appreciated MSE community.

I was wondering if someone here could shed some light on an issue that we have come across during our current flat purchase. We were imminently due to exchange awaiting seeing proof that the whole building was adequately insured, after weeks of the sellers solicitors asking the management company, they provided individual insurance for each of the flats but crucially were unable to provide evidence that the common areas were also covered.

We have been told by our solicitor that the building that we are attempting to purchase a flat within does not have correct insurance as there is no common part insurance to cover the common areas of the building. The management company responded that although they could not provide evidence of this in the insurance certificates their insurance broker has stated: 'the intention is that the common parts would be covered' (In the insurance policies provided).

We are now in limbo with the management company saying that the insurance is adequate and the sellers solicitors and our solicitors arguing the opposite. The sellers solicitors have contacted the landlord and we are waiting for a response. Flats have been sold and bought in this block it seems strange to me that this issue is just being highlighted now?

Anyone had this issue before?
Any advice for a first time buyer somewhat out of their depth?

Kind Regards,
ILS

G_M

they provided individual insurance for each of the flats

1) is this X separate policies (one for each flat)? If so, are all the policies with the same insurer?

2) Was this purchased by the management company, or by the individual leaseholders (flat owners)?

3) what does the lease say aboutt insurance? That the leaseholder must insure their flat? Or that the leaseholder must pay their share of insurance provided by the freeholder/management company?

If it's all the same insurer, ask the management company to get the insurer to write a statement that they are providing cover for the common parts. sorted.

eddddy

The lease should specify how the entire building (including the common parts) is insured.

Most often, the lease says the freeholder must insure the whole building - and apportion the charge to all the leaseholders. But sometimes each leaseholder has to individually insure their own flat.


If the lease doesn't specify who insures the common parts, that sounds like a defective lease - and it should be possible for any leaseholder or the freeholder to get a compulsory lease variation:

An individual party to a lease can make an application to a First-tier Tribunal (Property Chamber) to vary the lease under the provisions of Part 4 Section 35 of the Landlord and Tenant Act 1987. However the grounds for a compulsory lease variation are limited. The grounds under which you can make an application are:

...

• The insurance provisions of the lease are inadequate.

Link: https://www.lease-advice.org/faq/in-what-circumstances-can-i-apply-to-the-first-tier-tribunal-property-chamber-to-vary-my-lease/

Edit to add...

You don't specifically say that it is a leasehold property in England/Wales - but I'm assuming it is!!!

InLoneShadows

Hi G_M,

1) Yes they are all under Zurich
2) This was purchased by the management company
3) The leaseholder must pay their share of insurance provided by the freeholder/management company.

Thanks that is a good idea, not sure if the sellers solicitor has done this or not but it is a good place to start.

Kind Regards,
ILS

eddddy

Re-reading your posts, I think your saying that the lease is clear that the freeholder should be insuring the whole building (including common parts) - but the insurance policy isn't clear.

Normally, a buildings insurance policy simply covers the whole building - it doesn't mention individual flats, common parts etc.

I guess the policy wording must be a bit strange, if it's worrying your solicitor.

InLoneShadows

Hi Eddddy,

That is correct at least that is how I see it.

The insurance is for each flat induvidually I have 5 'certificates of insurance' that specifically mention the flat that they cover within a folio ref which might be the management company plus building.

Kind regards,
ILS

eddddy

InLoneShadows wrote: »

The insurance is for each flat induvidually I have 5 'certificates of insurance' that specifically mention the flat that they cover within a folio ref which might be the management company plus building.

If the lease says the freeholder (i.e. the management company) should insure the whole building, it's very weird to have 5 separate policies. It would be more normal to have just one policy for the whole building.

Are the 5 flats in a single vertical building? Or are they over/under some other type of premises - like shops, offices, other commercial (or other flats)?

And who is the management co? Are they a professional management co or maybe a group of 'amateur' leaseholders?


Edit to add...

Is there any kind of head lease that covers just the 5 leasehold flats?

InLoneShadows

Hi Eddddy,

I cant attach one of the obscured policies because of the new user policy on this site. The flats are above a commercial unit. The commercial unit insurance has also been provided.

ibb.co/cW9RKS (add https)

The management company is Orbit property management

Edit to add: Hmm i'm unaware of any head lease but could be worth asking about.

Kind Regards,
ILS

eddddy

InLoneShadows wrote: »

The flats are above a commercial unit.

OK - maybe that's why. (Is your mortgage lender happy with that?)

But it still seems weird. It should be possible to get a single policy for a mixed commercial/residential building.

Personally, I would also ask the management co why they don't have a single policy for the whole building.


On the basis that your seller's solicitor and your solicitor both feel that the insurance is inadequate, it's not sensible to proceed until this is sorted out.

FWIW, as you appreciate, insurance policies are renewed each year. It could be that they had a different insurance policy in previous years, which was acceptable to previous buyers.

G_M

I'd steer clear unless the policy is clarified or changed.

InLoneShadows

Thanks both for the advice really helpful,

Yeah the mortgage lender was fine with the commercial unit. Its an A1 commercial use in an area that is difficult to get change off use and only partially above the very back of the unit.

Kind Regards,
ILS