Buildings insurance-absent freeholder

innis

So our story is probably similar to many out there. 

In Our building there are two flats and two commercial units. We all own the leases on them but our freeholder has been absent for years (both freeholder and original lease taker company went into liquidation like twenty years ago)... soo we don’t have a management company and don’t have a freeholder. Upon purchase there were indemnity policies but are those enough? So the question is - how do we go about the building insurance? Can we buys jointly ourselves or do we need to establish a company to manage the building somehow? What options do we have? 

eddddy

You should be able to informally arrange buildings insurance without forming a company.

That will be fine if all the leaseholders agree to contribute to the insurance premium. However, if they refuse to contribute, you'll have a problem. The freeholder would be able to take legal action, if a leaseholder refused to contribute, but you won't have that option.


Do the commercial units take up less than 25% of the floor area of the building? If so, you have some formal options that you could follow - and you could then enforce things like contributing to the insurance costs:

• The Leaseholders could acquire the 'Right To Manage' the building - then you'll formally take over responsibility for insuring and managing the building. (See: https://www.lease-advice.org/advice-guide/right-manage/)

• The leaseholders could compulsorily purchase the freehold (it's called 'Collective Enfranchisement'). But it can be complex and expensive if the freeholder can't be traced. (See: https://www.lease-advice.org/advice-guide/ce-getting-started/)

huckster

Presumably if the leaseholders went ahead with their own Insurance arrangements, this would affect the indemnity policy that you arranged when purchasing the property.

Nothing stopping you protecting your asset by arranging Insurance for your property, if you are worried about the current Insurance.  But you have to be careful to make sure the Building sum insured is adequate.  This is where it becomes tricky, as you cannot just look at the rebuilding cost of just your property alone, as your property is part of a larger unit.

innis

thanks! 

Freeholder definitely not around! So it is on us to ensure we have the building protected. We are looking at buying the freehold as the last option as such fuff and expense. 
Indemnity insurances we have though only cover the original amounts (at the purchase) and not the actual value of the properties now. Can we buy a new indemnity insurance now?
When speaking to insurance companies they keep telling us that only those with interest in the property can insure - but how are we not interested, we have mortgages etc! Can anyone maybe suggest a specialist company we can talk to or can we just buy insurance from the high street? Say each unit gets their own building insurance? Or if commercial ones don’t, can we, the flat owners, just increase the insured value of our flats?
also, we, the flats, are happy to pay for all but still need everyone on the insurance, what if commercials refuse? They take up 34% of the building....
Such headache!!

huckster

Home Protect brokers or Towergate brokers may be worth contacting, as it is probably best not to have a standard Home Insurance policy.  Brokers can suggest best option to suit this situation.

eddddy

innis said:

We are looking at buying the freehold as the last option as such fuff and expense. 
...
also, we, the flats, are happy to pay for all but still need everyone on the insurance, what if commercials refuse? They take up 34% of the building....

If the leaseholders of the commercial units refuse to contribute to the cost of insurance, there's nothing you can do to force them.

As the commercial units take up 34% floorspace, you can't compulsorily purchase the freehold, and you can't form a 'Right To Manage' company to take over management of the building.


But... you might be able to apply to the First Tier Tribunal to appoint a Manager.  The manager would be answerable to the tribunal, rather than being answerable to the freeholder or you. The manager would arrange insurance - amongst other things.

See: https://www.lease-advice.org/advice-guide/what-does-appointing-a-manager-mean/