Who pays the excess? 10 March at 4:11PM in Insurance & life assurance 11 replies 255 views

Tahlullah.H

I have a flat in a block.  The freeholder holds insurance for the building and I as a leaseholder separately insure the contents of my flat.

There was a severe leak - a 'tenant' in a flat 2 floors above me, interfered inappropriately with some pipework, which affected the 3 flats below.

I have managed to get the freeholder to accept that there has been damage to my flat, and they have sent me details of their insurance so I can make a claim.  However, on reading, there is an excess to be paid.

Am I expected to cover the excess, which means I am ultimately paying for the repair to my flat, or can I reasonably argue that one of the freeholders tenants were responsible for the damage and they should (the freeholder) bear responsibility for the full cost of repair to my flat?

Thanks for your guidance.

user1977

I don't think there's any principle that the freeholder has to indemnify you against the actions of other leaseholders (or their tenants - not sure what you mean by "tenant" here). You may of course have a claim against the actual party who was negligent. But in general the excess is for you to bear in relation to your own property.

Tahlullah.H

Thank you for your response.

Tenant means exactly that, the property is rented from the freeholder, whereas I am a leaseholder.

I will give this some thought.  It may be best for me to find my own tradesmen and submit the bills for payment, rather than use the ones that would be allocated by the insurance company.

DullGreyGuy

You need to read your lease... either you pay it as the claimant or the freeholder pays it initially and its recharged to all leaseholders.

Sarahspangles

I think the freeholder pays the excess - how can you, when you’re not a party to the insurance?  You’re just providing details of your loss to add to the claim, along with the losses of the freeholder and (presumably) the flat in between yours and the origin of the leak.

eddddy

Sarahspangles said:

I think the freeholder pays the excess - how can you, when you’re not a party to the insurance?  You’re just providing details of your loss to add to the claim, along with the losses of the freeholder and (presumably) the flat in between yours and the origin of the leak.

There are generally two ways this might work...

Option 1. Those benefitting from the insurance claim share the excess. So...

• If one flat is being repaired from the insurance claim - that leaseholder pays 100% of the excess
• If two flats are being repaired from the insurance claim - those two leaseholders pay 50% of the excess each
• If two flats plus a communal area is being repaired - the two leaseholders and the freeholder pay 33% of the excess each (and the freeholder adds their 33% to the service charge) 
• etc

Option 2. The freeholder pays the whole excess, and it is added to the service charge (So effectively, every leaseholder in the block contributes to paying the excess.)


If you have a fairly modern lease - it might explicitly say whether Option 1 or Option 2 applies.

If your lease doesn't say anything explicitly about it - it's really a case of arguing about it, based on the wording of the lease.

If you can't reach agreement, you'd ask a tribunal to decide. They would analyse the wording of the lease and make a decision. In past cases, their decision has sometimes been option 1, and sometimes option 2. (Some people say the decisions are a bit arbitrary.)

user1977

Assuming there is nothing more specific in the lease, between freeholder and leaseholders I would expect it's whoever is ultimately responsible for the repair who is liable for the excess. So same rules as fixing anything else which wasn't insured against.

eddddy

user1977 said:

Assuming there is nothing more specific in the lease, between freeholder and leaseholders I would expect it's whoever is ultimately responsible for the repair who is liable for the excess. So same rules as fixing anything else which wasn't insured against.

Yep - you'd have thought so. And some tribunal decisions seem to have agreed with your opinion.

But some tribunal decisions didn't agree with your opinion. Here's some quotes from one of them:

The tribunal determines that the Applicant is entitled to be reimbursed in full for the insurance claims made by him and that the excess under the insurance policy in force is to be paid out of the service charge account.

Because:

20. In the view of the tribunal the annual requests for insurance premiums is a service charge within the meaning of Section 18 of the Act and the excess is part of the contract of insurance and accordingly part of the service charge.

21. The reasons for this is that the level of the premium is directly related to the level at which the excess is set. The higher the excess the lower the premium and vice versa. 

Link: https://decisions.lease-advice.org//app/uploads/decisions/act85/10001-11000/10193.pdf

Tahlullah.H

Thank you all for your contribution.  I will argue with the Freeholder and see what he comes back with.  Ultimately, the threat of the Tribunal may be enough to focus the mind.

eddddy

Tahlullah.H said:

There was a severe leak - a 'tenant' in a flat 2 floors above me, interfered inappropriately with some pipework, which affected the 3 flats below.

Just to add...

It sounds like you're saying that the tenant upstairs may have been negligent (by interfering with the pipework).

If you have evidence of negligence you could claim for for your losses (including the insurance excess) from that tenant.

Tahlullah.H

Yes, that is what I am saying.  All in the block were instructed to contact the freeholder if they wished to do anything with the heating, as it affects all, including supply of hot water.  There are 11 floors to the block, all with combined heating, so the amount of water is immense.

The plumber who came out stated that the tenant has tried to do something and it had 'popped'.  I do not know how I would be able to evidence the negligence beyond someones say so.  Additionally, I do not think the tenant would be able to pay, which is why I think it falls to the freeholder.  It would be for them to claim against the tenant, but they wouldn't, as I now understand they are benefit claimants and their rent paid by the local authority.  It is more likely the freeholder would add  the cost of the excess to the service charge, divided across all the flats within the block.

I have not had a response from the freeholder about the excess as yet, but it is only Monday morning!