Leasehold/High Building Insurance??

fussyhumanbeing1

I’m in the process of potentially purchasing a 2 bed Flat. I’ve been told that the buildings insurance is not included in the service charge previously, and I've just been told what the insurance premium is for my flat (a few days before exchange)

I’m shocked to be told that the insurance premium will be £900 per flat (p.a), which is 1/3 of the total building contribution. There are three flats in the converted Victorian building. My flat within the overall property is worth £425k, which is a part of the larger development. Aside from this, the service charge is 600£ pa, and the GR is 325£ pa.

I’m unfamiliar with buildings insurance in the UK/London but this feels like an absolute rinsing and possible extortion and feels like sufficient grounds for me to walk...

Any ideas what’s going on?

eddddy

fussyhumanbeing1 wrote: »

I’m shocked to be told that the insurance premium will be £900 per flat (p.a), which is 1/3 of the total building contribution.

...

Any ideas what’s going on?

It could be that there have been a number of claims on the policy recently - which has pushed up the premium.

Converted flats can have a bit of a reputation for water damage claims (e.g. Water leaking in the top floor flat quickly finds it's way into the flats below.)

It could also be because the freeholder is earning 'commission' on the insurance.

You can ask the seller why the premium is so high.

G_M

Who has control over the choice of insurer?


Is the freeholder a private company? One of the flat owners? Shared between all the leaseholders?

da_rule

How long is the policy? If it was more than 12 months (some freeholders sign up for 3-5 year policies) and with an insurance provider (i.e. the freeholder doesn not self insure) then s.20 consultation should have been carried out before the insurance contract was entered into. Check with the seller whether such consultation was carried out. If not, you can challenge it in the tribunal as without the consultation they are limited to £100 per year for any long term contract.

fussyhumanbeing1

eddddy wrote: »

It could be that there have been a number of claims on the policy recently - which has pushed up the premium.

Converted flats can have a bit of a reputation for water damage claims (e.g. Water leaking in the top floor flat quickly finds it's way into the flats below.)

It could also be because the freeholder is earning 'commission' on the insurance.

You can ask the seller why the premium is so high.

This conversion was completed about 8 months ago. The seller is also the freeholder and will hold the insurance policy against his name. It could be that the policy holder has made a lot of claims in the past?

None of the other flats (3 in total) have sold yet and the freehold title has only just been converted to leasehold since renovation. £900 p.a for a 700 sqft converted flat does seem rather ridiculous no?

fussyhumanbeing1

G_M wrote: »

Who has control over the choice of insurer?


Is the freeholder a private company? One of the flat owners? Shared between all the leaseholders?

That is the freeholder and also the seller. The freeholder is a private developer who is also the seller and has taken out the policy, which the leaseholders must bear. This is the first insurance policy for this block of converted flats since the renovation. There are no other leaseholders, neither of the other two flats have sold yet.

davidmcn

fussyhumanbeing1 wrote: »

£900 p.a for a 700 sqft converted flat does seem rather ridiculous no?

Yep. Look at the comparison sites if you went a better idea based on postcode etc. I pay £143 for a 2 bed flat and that includes contents. Luckily in Scotland so we don't need to deal with freeholders.

fussyhumanbeing1

davidmcn wrote: »

Yep. Look at the comparison sites if you went a better idea based on postcode etc. I pay £143 for a 2 bed flat and that includes contents. Luckily in Scotland so we don't need to deal with freeholders.

I checked money-supermarket, using the freehold title at the postcode, and assuming it is a 5 bedroom property with 3 bathrooms and several other rooms and most of the premiums were between £300-£1000, I have no idea how this guy has managed to find a policy worth almost £3k.

eddddy

fussyhumanbeing1 wrote: »

The seller is also the freeholder and will hold the insurance policy against his name.

That means it should be easier for you to get some answers from the freeholder - as they want to sell you the flat.

Tell the freeholder that the premium seems very high, and ask if they can they offer any explanation.

G_M

It's hard to get premiums via comparison sites for flats.

a 5 bedroom property with 3 bathrooms and several other rooms and most of the premiums were between £300-£1000,

That would be for a house - a single residence.


You are trying to insure a building comprising 3 flats (as I understand it). Completely different.


Speak to an insurance broker.