Leaseholder & Joint freeholder - Building insurance joint or separate?

marie43read

hello
hoping someone can help...
I have lived in my flat for 29 years  (one  house converted into 2 flats). Myself and upstairs neighbour originally had to get building insurance through freeholder, single policy for both flats.  About 15 years ago we purchased the freehold between us and continued to buy joint insurance. Neighbour  sadly died and new owners have informed me that they have purchased their own building insurance and I need to now do the same. I have received my amended yearly reminder for building insurance  and its more than what it was when we shared the bill, made no difference in cost between insuring as whole building or one flat. . If I have to shop around for cheaper insurance  that's fine, but looking at previous threads I see that in some instances leases states the building HAS to be insured as one building. I have looked at lease (quite hard reading ) and I can not see anywhere where it refers to building MUST be insured as a whole. the only part I can see that refers to insurance is ' to insure and keep insured the building during the term' ..... So basically am asking would the insurance still be valid if we had two separate polices 
thank you 

cattie

I expect it would still be valid, but would make life more difficult if there was a claim as each policy would only want to pay out 50% of any claim. Also there could be issues concerning things such as roof or heaven forbid, subsidence should your lease make the top floor flat wholly liable for roof or ground for flat soley responsible for any groundwork issues. If whole building covered under one policy it just makes things much simpler & smoother should a claim ever arise.

Really new owners should have discussed with you as joint freeholder on the best way to handle the buildings insurance before going ahead & purchasing one for only the top floor flat. Often mortgage lenders will require that the whole building is insured under one policy too.

tacpot12

There is nothing to stop you insuring the building on one policy next year. It would be as well to try to sell your joint freeholder on the benefits of this if you think it will save you both money, and make claims easier to manage. 

marie43read

Thanks for your replies.
New owners were given all the information, it was good insurance from a reputable firm....I gave them permission to discuss the policy with insurers, they opted  to buy their own from a separate insurer and take their name of the policy. Not happy but not much I can do 

Sandtree

If you go down the route of buying your own insurance certainly clarify with the insurer the methodology for calculating the rebuild value (if its not an unlimited policy) as its clearly not straightforward to build just a flat, even more for your upstairs neighbours.

marie43read

Good morning 
I have spoken to the people who have bought the flat upstairs and the insurance provider and it would seem that because they are letting the flat upstairs out, they were advised to buy separate building insurance as the existing policy did not cover it being let. That still leaves me having to buy separate building insurance for my downstairs flat which cost the same as insuring the whole building ( 100% increase) .
A rather unfair outcome but do not think there is much I can do about it, unless anyone knows if you can buy building insurance where one of the flats is let. ( I am actually aware of quite a few friends that have let flats out and still just pay their share  the ' building insurance ')
Thanks again 

Sandtree

Your friends will be living in properties where the freeholder has purchased Block insurance which already anticipates that the occupiers of the flats are unlikely to be the freeholder (who is often a company) and so doesnt have an issue with letting

marie43read

Thanks Sandtree  - so I will have to try and find my own insurance ? 

eddddy

The correct/sensible way to insure the building would be to follow what the leases say.

• If the leases say that the freeholder(s) are responsible for insurance, then the joint-freeholders should insure the whole block

• If the leases allow flats to be sub-let (i.e. let out), then the joint-freeholders should make sure that the insurance policy allows sub-letting

• If the leases don't allow flats to be sub-let, then the joint-freeholders insurance policy doesn't need to cover sub-letting

So that would probably be the best approach for you to take.

But as joint-freeholders, in theory, you can choose to ignore the leases and do whatever you want.  But if you start doing that you need to think things through carefully, otherwise it can turn into a bit of a mess - as you're maybe finding out.

greatcrested

marie43read said:

....... I have looked at lease (quite hard reading ) and I can not see anywhere where it refers to building MUST be insured as a whole. the only part I can see that refers to insurance is ' to insure and keep insured the building during the term'

Yes, but is this clause in a section relating to the leaseholder's responsibilities, or the freeholder's responsibilities?

I'll put money on the latter.

In which case 'The Freeholder' (in this case you and your neighbour jointly) must insure the entire building. 'The Freeholdder' can then claim back the cost from each leaseholder, presumably shared 50/50.

If it is the latter, then it makes no sense; why would a leaseholder (who owns just one flat within the building) have an obligation to 'keep insured the building', rather thn just his flat, or half the building eg the ground floor?

As for your neighbour's recommendation to get landlord's insurance - there are thousands of buildings which are insured and in which there are tenancies. Speak to a broker who will find a whole-of-building policy appropriate for a tenanted building.

Assuming, of course, that your neighbour is entitled to let out the property. Does the lease have any restriction on this? Perhaps requiring 'the Freeholder's ' consent or perhaps prohibitting it completely. In which case specialist insurance is not needed as the neighbour will have to evict the tenants and either occupy the property himself, leave it empty, or sell.