Joint freehold building insurance - does it need to cost this much?

XYZ5

Hi all, looking for advice please! Will try to keep brief…

We bought a ground floor flat earlier this year in a building that contains two flats, with a shared hallway and front door, and we share the freehold with the owner of the upstairs flat. During the sale our contract required us to take on joint building insurance with the other freeholder, which I believe is fairly standard - there was an existing policy in place, which we paid the remainder of, with a view to renew the policy in October.

At the time we thought the policy seemed very expensive compared to other quotes for buildings insurance that we’d seen, but assumed there were some tailor-made elements to it that related to the former owner (I know we should have looked into this more at the time, but we are first-time buyers and there was a lot going on!). We had assumed we would be able to get a better deal from the broker when the renewal date came around.

However, it turns out that this policy only covers the buildings sum insured, with no extras - it just is that expensive. We are talking £1,350 for the year, so our half is around £700 and we are not able to pay in instalments. When we got a few rough-and-ready quotes before, for a building with a rebuild value of ours, we were coming up with yearly quotes for about £300 or less.

The reason we have been given for it being so expensive is that the other freeholder is set up as a company, rather than a private individual, and therefore has to pay a premium for Pool Re Terrorism Risk - something I had never heard of before. But it has also been suggested by the broker that the policy is expensive in general because it is a joint freehold policy and therefore needs a specialist insurer - is this the case? Surely there are a lot of joint freehold building insurance arrangements? I would also have thought there were quite a lot shared between private individuals and companies (thinking mainly of shops above flats and so on, but maybe these tend to be leasehold…?)

Any advice/further explanation would be great as it is not really forthcoming from the broker and I can’t find much about this situation online. Our seller was also set up as a company, so I’m guessing this arrangement benefited both parties before, but it seems odd to me that we have to pay so much for something that is related to their company status and nothing really to do with our use of the building. Should also add that the upstairs flat is rented out, if that makes any difference.

Thanks in advance! Basically just wondering if we have to suck it up and pay it, or if there is a cheaper way of doing this that we are not seeing…

eddddy

What exactly do you mean by...

XYZ5 wrote: »

the other freeholder is set up as a company

But moving on to your main questions...

XYZ5 wrote: »

The reason we have been given for it being so expensive is that the other freeholder is set up as a company, rather than a private individual, and therefore has to pay a premium for Pool Re Terrorism Risk - something I had never heard of before.

I'm wondering if you have misunderstood?

A court ruling in 2014 suggested that freeholders should typically have terrorism insurance for blocks of flats - it's nothing to do with your joint freeholder being "set up as a company"

See...

In 2014, a court ruling suggested that terrorism cover is a requirement for most flats, even when their location makes the risk of attack seem remote.

Link: https://arma.org.uk/news/2017/12/why-blocks-need-terrorism-insurance

BUT... as joint freeholders, you and your neighbour have the complete freedom to jointly decide not to bother with terrorism insurance (but it would need to be a joint decision).

XYZ5 wrote: »

But it has also been suggested by the broker that the policy is expensive in general because it is a joint freehold policy and therefore needs a specialist insurer - is this the case?

Again, I wonder if you have slightly misunderstood?

Freeholder's buildings insurance for a house converted into 2 flats will be more expensive than buildings insurance for the same building used as a single house.

But I wouldn't expect 'Joint Freeholders' to be charged more than a 'Sole Freeholder'.

However, if you think you are over-paying, ask some different brokers for quotes - to see if they can find cheaper cover.

XYZ5

Hi, yes, it's entirely possible I have misunderstood! All very confusing to me...

What I'm wondering though, really, is do the figures sound right? Rebuild value is around £395,000 for the whole building, so does this seem a reasonable figure for the insurance?

When I say they are set up as a company I mean we have a joint freehold agreement with a company rather than an individual person - I'm not sure how else to explain this? The broker told us this was why we needed the terrorism insurance and why it was expensive, but as you say, that is probably not the case.

I will try to get another quote then maybe. Do you need to approach specialist brokers for joint freehold generally?

eddddy

XYZ5 wrote: »

When I say they are set up as a company I mean we have a joint freehold agreement with a company rather than an individual person - I'm not sure how else to explain this?

OK - so the freehold is jointly owned by 2 entities - a limited company and an individual (you being the individual).

I'm not aware that ownership structure would make insurance more expensive - but maybe.

(But just to double-check - you're sure that you don't mean that the freehold is owned by just one company, with you and your neighbour each owning a share of the company. That would be more usual.)

XYZ5 wrote: »

I will try to get another quote then maybe. Do you need to approach specialist brokers for joint freehold generally?

Yes - it's probably easiest to talk to brokers.

But ask for 'Freeholder's Buildings Insurance for flats' - don't confuse things by asking for 'Joint Freeholder's Insurance'.

You just want a 'Freeholder's Buildings Insurance Policy' which is in the name of 2 policy holders (those policy holders being a company and an individual).

XYZ5

eddddy wrote: »

OK - so the freehold is jointly owned by 2 entities - a limited company and an individual (you being the individual).

I'm not aware that ownership structure would make insurance more expensive - but maybe.

(But just to double-check - you're sure that you don't mean that the freehold is owned by just one company, with you and your neighbour each owning a share of the company. That would be more usual.)




Yes - it's probably easiest to talk to brokers.

But ask for 'Freeholder's Buildings Insurance for flats' - don't confuse things by asking for 'Joint Freeholder's Insurance'.

You just want a 'Freeholder's Buildings Insurance Policy' which is in the name of 2 policy holders (those policy holders being a company and an individual).

Yes the freehold is jointly owned by 2 entities - a private limited company and an individual (well, technically two of us, but I think we count as one in this instance). It was previously shared by two limited companies and we bought our share from one of them.

Thanks for clarifying - I can't find anything online for joint freehold policies, so maybe that's where I'm going wrong trying to find comparative quotes! Will do as you suggest.

Also, this is what the broker said to me when I queried the cost, which is where my confusion came from:

"Every insurer would need to be made aware that this is a joint freehold and as the other side of the freehold is in a company name the policy has to be ceded to Pool Re (Terrorism Cover). As this is a joint freehold it limits the options on who we can place the business with, therefore we have placed this with xxxxx as they have a facility to look after a joint freehold whereas a lot of insurers would decline, especially those on aggregator websites."