Share of freehold home insurance - separate policies vs block insurance

Hriss

Hi everyone,

We are in the latter stages of purchasing a share of freehold property in London (FTBs), and are starting to think about how to organise insurance prior to getting the keys etc.
It is a Georgian property converted into two individual flats with minimal shared communal areas (e.g. we have the garden :T). Currently the owners of the two properties have individual insurance policies, and even though there is a management company set up, there is no shared insurance policy, or sink fund. We find this pretty weird, however they say they are on great terms, and just fix things together as and if when they arise. Please let me know if you see this as a major red flag!
All share-of-freehold owners will live in - no rental/landlord situations to consider.

• I cannot find a suitable insurance policy online specifically for such small share of freehold properties, only very expensive "block of flats" policies with companies I've never heard of before. Any ideas? Any companies the likes of Admiral, Churchill, or Direct line who offer share of freehold options to cover the whole house including communical areas, but as two flats?

• Is it possible to insure the whole house as a whole (one two-storey, 4 bed house), adding me, my partner, and the other two freeholders upstairs as joint policy holders with equal responsibilites, and do not take into consideration the fact that it's actually two individual flats? Has anyone done this or has heard of it? Which companies can we do it with? The typical comparison websites are no help unfortunately.

• Do we need to use the management company (which seems to exist for no purpose whatsoever) to set up the insurance of the whole house and if so, again, why cant we just use the regular insurance companies? I called up Admiral and they advised separate policies, which makes me very concerned about major accidents involving the whole house eg fire etc.

Thank you so much in advance - I really cant think of any other better better crowd that is more helpful than the MSE forum!

eddddy

Just to be clear, you will be buying two things:

1) A Leasehold flat
2) Joint ownership of the freehold building (perhaps through a company)

You should start by seeing what the lease says about buildings insurance.

Normally it's the freeholder's responsibility to insure the building (i.e. the whole building on a single policy). So as Joint Freeholders, you should take out a policy for the whole building.


Very occasionally, leases will say that each leaseholder is responsible for insuring their own flat. That can present problems. If your lease says that, ask your joint freeholder if they would consider taking out a single policy with you to cover the whole building.

eddddy

... and if you want to insure the whole building, you will need a 'block of flats' policy. The companies you've never heard of are probably insurance brokers.

Jacquelyne

Having the whole building insured under a block policy is the best way forward. You can have all freeholders named on the insurance and then split the premium equally between you. Depending on the size of the building a block policy shouldn't cost silly money.


Having 2 separate insurance policies covering one building could be problematic in the event of a claim. You could have 2 different insurance companies involved, both trying to appoint their own loss adjusters/contractors etc. and arguing with each other about how the claim should be handled.


Also, you have to trust that the other freeholder will remember to renew their insurance every year. I'm sure its very unlikely that it would ever happen, but just suppose one day the other flat owners forget to renew their policy and it lapses. If the building burnt down, you could face the very costly problem of being underinsured. You may have insurance covering your flat, but the building would need to be rebuilt as it stands now (a house converted into 2 flats). You can't just rebuild your half of the building, and your insurance may not be enough to cover the cost of restoring the whole property.

cattie

It's very unusual to have to each take out your own policy with SOF flats & your best way forward might be to stick with the same insurer as the person you are buying from.

G_M

It's not that unusual, though as explained it's not ideal.


I would

* check your seller has got valid insurance in place for the flat you are buying
* check the lease to see what is specified re insurance
* purchase the flat
* invite the other flat-owner/ joint freeholder to tea, baks a nice cake, and suggest that from next renewal date you act jointly as freeholders to insure the building. If the leases specify that, so much the better - have a copy of the lease to hand to show.
* if the leases specify that each leaseholder should insure their own flat, I'd still suggest insuraning jointly,but the other leaseholder would be within their rights to refuse based on their lease.

arciere

I have been there. I live in a first-floor flat in a 2-flat converted ex-council house.

I struggled to have any insurance company willing to insure the building, so I've had to look at 'specialist' block-of-flats policies from 'unknown' companies.

On a legal side, I think that, as shared owner of the freehold, you are legally responsible for the integrity of the whole building anyway, no matter which flat you actually live in (unless of course your lease says otherwise).

G_M

arciere wrote: »

........ you are legally responsible for the integrity of the whole building anyway, no matter which flat you actually live in (unless of course your lease says otherwise).

which is why we've all been telling Hriss to read the lease!


Till then, we're all guessing.....

Hriss

Hi all,

Thank you all for the helpful responses, agree on all points made!

I did forget to write about the terms of the lease indeed - we have taken this into consideration. It is quite an ancient document written in legalese, and it states in a sentence 1.5 A4 pages long that "the property needs to be comprehensively insured to the full reinstatement value". Other legal fluff aside, there is no useful guidance on which party is responsible for insuring what, or in what fashion.

Interestingly, on the point raised that a single policy will be cheaper than a block of flats policy, I've been searching around for sensible block policy quotes to take to share with our future neighbours and suggest to switch over (we'll cover any overlaps costs for them etc..) , and so far the two block of flats policies I've been quoted on were in the £500+ range (building only, no contents), one with a rather popular high-street provider. The quote for our flat only in is the £150 range (building + contents), and the upstairs flat is only 1 bedroom bigger (3 bed vs 2 bed). So weird! I am definitely not concerned about the money here - could you please help me understand this discrepancy, as everything I've read anywhere on this topic suggests I should be seeing the opposite trend? We'd like to do things right from the beginning rather than have 2 separate policies for a year just because we didnt communicate better pre-sale.

Any thoughts will be greatly appreciated!

Hriss

G_M

OK - you've made a start. Now quote in full if you want sensible advice!

Hriss wrote: »

....... It is quite an ancient document written in legalese, and it states in a sentence 1.5 A4 pages long that "the property needs to be comprehensively insured to the full reinstatement value".

* Please find the 'definitions' section. In this context, does 'the property' mean the building, or the flat? Read the lease!
* where does the clause above appear in the lease? Usually there is a whole section of clauses that are under 'leaseholder responsibilities' (or 'the leaseholder undertakes to:.....") and another whole raft of clauses that are under 'freeholder responsibilities' (or 'thefreeholder blah blah..."). Which is it?



Other legal fluff aside,

it's not 'fluff'.It's important. And if it relates to insurance,it's relevant.

there is no useful guidance on which party is responsible for insuring what, or in what fashion.

unlikely,but I can't really comment based on 12 words quoted out of context from a document that is presumably many pages long if those 12 words come from a single sentence running to 1.5 A4 pages.


Interestingly, on the point raised that a single policy will be cheaper than a block of flats policy, I've been searching around for sensible block policy quotes to take to share with our future neighbours and suggest to switch over (we'll cover any overlaps costs for them etc..) , and so far the two block of flats policies I've been quoted on were in the £500+ range (building only, no contents), one with a rather popular high-street provider. The quote for our flat only in is the £150 range (building + contents), and the upstairs flat is only 1 bedroom bigger (3 bed vs 2 bed). So weird!

Not wierd.This is the crux of the reason why a singlepolicy is better. A policy just for your flat will probably cover the external walls of your flat.Not the roof. Not the foundations.
And chances are if there was a fire and 2 claims weremade (by you and upstairs) the 2 insurers would spend 6-12 months arguing over who pays what % of the total cost of demolition, architect/surveyors fees for the rebuild, and then the rebuild itself. And what % is uninsured by both of them............

I am definitely not concerned about the money here - could you please help me understand this discrepancy, as everything I've read anywhere on this topic suggests I should be seeing the opposite trend?

There are 4 elments involved:
1) the land under the building
2) the shared common parts of the building
3) your flat
4) the other flat
If you insure 3) above and your co-freeholder insures 4) above, it will be much cheaper than insuring all 4 of the above. And potentially much more problematic too



We'd like to do things right from the beginning rather than have 2 separate policies for a year just because we didnt communicate better pre-sale.
Notmuch you can do pre-sale. The other leaseholder/ joint freeholder is unlikely to engage with you partly because you might pull out, though you can try - in fact it's always worth knocking on the door, introducing yourself, and having a general conversation about the locality, the street, the building...... and the insurance.

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