Having to pay leaseholder for checking insurance

serendipity109

Leasehold 1.50 per year, however leaseholder needs to check the insurance documents and approve for which they charge 45 per year admin. Although solicitor state its bi annual (how can this be when it's yearly?) Anyway, this admin fee, how much can they up this by, seems madness that the policy is 125 yet their charge is 45 on top (maybe 90) solicitor says there is no limit what they can charge....

NameUnavailable

It's not clear what you are asking. However freeholders/management co's can charge for certain things such as permission to make changes to the property, or to let it out etc., and no, there's no limit other than they must be 'reasonable'.

eddddy

I'm assuming....

• You own a leasehold house.
• The ground rent is £1.50 per year.
• The lease says you are responsible for insuring the house
• The lease says you must show the Freeholder that you have taken out appropriate buildings insurance each year
• The Freeholder is charging you an Admin Fee of £45 for checking the insurance each year

As NameUnavailable says, the law states that any Admin Fee must be reasonable.

TBH, £45 probably sounds like a reasonable fee for checking the insurance policy once each year.

But I can't see it's reasonable to do this twice a year. If the freeholder checks the policy at the start of the policy year, it's a bit daft for the freeholder to say "I need to check the policy again in 6 months time to see if anything has changed".


If you want, you could investigate buying the freehold of the house. It should only cost a few hundred pounds (plus legal fees). Then you wouldn't have any more admin fees to pay.

serendipity109

So...relating to this issue, £45 was paid back in September on completion of contracts for the year September 2021- September 2022.
Fast forward to today, another bill received in advance for checking the policy from September 2022-23 is this allowed to effectively charge upfront?

canaldumidi

What does your lease say?

And just to clarify for you:

* You are (we are assuming!) the leaseholder, and

* it is the freeholder who is charging you

Sandtree

eddddy said:

But I can't see it's reasonable to do this twice a year. If the freeholder checks the policy at the start of the policy year, it's a bit daft for the freeholder to say "I need to check the policy again in 6 months time to see if anything has changed".

The only thing would be a more cursory check that the policy is still in force... ie you havent taken the insurance out, provided the cert and then cancelled in the cooling off period (as many people do when getting their car out the police pound). Problem is you dont typically get mid term docs and so not sure how'd sending the same cert would prove anything. Since certificates went digital they no longer require their return (and even then that was more of a Motor thing).

saajan_12

Could you take out a multi year policy and then argue they only need to re-check after that policy runs out that you've renewed it? Eg take out a 5 year policy, and then they don't need to check again during the 5 years, as all you could show is the original paperwork, its hard to show you've not subsequently cancelled it in year 2.

However not sure if a longer policy is even available or if you'd narrow the pool of insurance providers and end up paying more for the cover than you save in the checking fees. 

eddddy

Thinking about it more, it sounds like a difficult legal point.

The lease says the freeholder can inspect the insurance policy twice a year. The law says the freeholder can charge a reasonable fee for doing that.

So there's the legal argument that the buyer should have read the lease before buying it - and if they didn't agree with twice yearly insurance policy inspections, they shouldn't have bought the leasehold house.



(There are a few limited circumstances where a leaseholder can go to tribunal to get a compulsory lease variation, if Admin costs in the lease are unreasonable. I doubt this example qualifies. But even if it did, that would probably cost hundreds of pounds or more to vary the lease. So it's probably cheaper to pay the extra £45 per year for the next 10 or 20 years.)

Sandtree

saajan_12 said:

Could you take out a multi year policy and then argue they only need to re-check after that policy runs out that you've renewed it? Eg take out a 5 year policy, and then they don't need to check again during the 5 years, as all you could show is the original paperwork, its hard to show you've not subsequently cancelled it in year 2.

However not sure if a longer policy is even available or if you'd narrow the pool of insurance providers and end up paying more for the cover than you save in the checking fees. 

Home insurance is a 1 year policy, I know of a single provider where it was a monthly policy with an annual review. Not aware of any company offering a multi-year policy. Obviously if its not illegal it is insurable and Lloyds of London have written much stranger things than a multi-year home insurance policy but bespoke underwriting comes with bespoke pricing that will be much more than an additional £90 per year.

canaldumidi

Is it perhaps to ensure the leaseholder has not cancelled the policy mid-year?