Buildings insurance excess

leaseholderwoes

Hello, I am a leaseholder of a flat which is part of an estate of approx 200 flats. The management company obtain buildings insurance for the entire estate. This year, due to multiple claims made, the excess for escape of water has gone through the roof - £25,000! I am told that each leaseholder is responsible for paying to repair damage to their own flat caused by leaks, even if the leak originated in another flat. So in theory I could have a £25k bill for my neighbour’s negligence. It’s terrifying.

The policy was taken out in Oct 2023 and has not been communicated to leaseholders - I only found out due to the conveyancing process when trying to sell my flat (needless to say my sale fell through).

I’m now being told that this excess could also cause mortgage providers not to lend on the property. 

I have looked into taking out my own buildings insurance policy just for my flat which covers escape of water. It’s a high premium but a much lower excess so may be worth doing. 

My questions for you are:

1. Is there anything wrong with having two building insurance policies running concurrently? (aside from the cost to me)

2. Would having this second policy with a lower excess satisfy mortgage lenders? 

3. Has my management company been negligent in not informing leaseholders of this change in policy?

4. What the hell can we do to get the excess down again quickly so I can sell my flat? The management company have not given any indication of remedial action they will take, only said that if no one makes any claims this year then next year the excess might go down. Surely they need to enforce more than that? Install flood detectors etc? 

Apologies for the length of this post.

Thanks in advance,
An extremely frustrated leaseholder 

DE_612183

Well they could have a lower excess - it just means they ( or you ) have to pay the increased premium - who pays for the building insurance now?

leaseholderwoes

DE_612183 said:

Well they could have a lower excess - it just means they ( or you ) have to pay the increased premium - who pays for the building insurance now?

Thanks for replying. It’s the management company and freeholder who organise it. They arranged it through a broker and apparently this was the best option he could get (based on what criteria, I’m not sure). They didn’t consult the leaseholders at any point about it.

DE_612183

who pays though?

you can usually have a lower excess - it just means the premium is more

Mark_d

1.  I think you might have difficulty getting your own buildings insurance policy because you don't own the building, or any part of it.  Even if you did own part of the building, for example your windows, I don't believe you could insure this alone under a buildings insurance policy.

3.  Your lease likely states that the management company has the right to choose the amount of excess on the policy.  This would involve choosing a reasonable balance between excess and premium.

My understanding is that the management company is responsible for any buildings issue - either by using an insurance company or their own funds.  I would seek legal advice if they try to pass on a £25,000 bill to you.

If your neighbour has been negligent resulting in water damage to your flat, perhaps by leaving the bath running and then falling asleep, then you can sue them.  However if a water pipe bursts in your neighbours flat whilst they are out, they they have done nothing wrong and ideally you should be able to make a buildings insurance claim.

I highly doubt that the management company's decision would bother mortgage lenders.  this sounds like fake news.

leaseholderwoes

Mark_d said:

1.  I think you might have difficulty getting your own buildings insurance policy because you don't own the building, or any part of it.  Even if you did own part of the building, for example your windows, I don't believe you could insure this alone under a buildings insurance policy.

3.  Your lease likely states that the management company has the right to choose the amount of excess on the policy.  This would involve choosing a reasonable balance between excess and premium.

My understanding is that the management company is responsible for any buildings issue - either by using an insurance company or their own funds.  I would seek legal advice if they try to pass on a £25,000 bill to you.

If your neighbour has been negligent resulting in water damage to your flat, perhaps by leaving the bath running and then falling asleep, then you can sue them.  However if a water pipe bursts in your neighbours flat whilst they are out, they they have done nothing wrong and ideally you should be able to make a buildings insurance claim.

I highly doubt that the management company's decision would bother mortgage lenders.  this sounds like fake news.

Thank you Mark. It is the management company and freeholder that are named on the policy, but they say they would seek to collect the excess cost from me if the damage was inside my flat. 

Most likely, we won’t even be able to make an insurance claim as I can’t see an escape of water causing over £25k damage. So effectively I would just have to pay personally to get any damage fixed, regardless of whether I’m at fault. The management company say they will only pay for leaks in communal areas (which would then be divided up between all leaseholders and collected within the service charge).

Re the mortgage lenders, I have been told this by a mortgage broker so I think there is some weight to it, although I still trying to iron out the details. 

Thank you for your thoughts on this, much appreciated. 

leaseholderwoes

DE_612183 said:

who pays though?

you can usually have a lower excess - it just means the premium is more

The leaseholders pay, as part of the service charge. But we have no input in choosing what cover is taken out. 

DullGreyGuy

leaseholderwoes said:

Hello, I am a leaseholder of a flat which is part of an estate of approx 200 flats. The management company obtain buildings insurance for the entire estate. This year, due to multiple claims made, the excess for escape of water has gone through the roof - £25,000! I am told that each leaseholder is responsible for paying to repair damage to their own flat caused by leaks, even if the leak originated in another flat. So in theory I could have a £25k bill for my neighbour’s negligence. It’s terrifying.

The policy was taken out in Oct 2023 and has not been communicated to leaseholders - I only found out due to the conveyancing process when trying to sell my flat (needless to say my sale fell through).

I’m now being told that this excess could also cause mortgage providers not to lend on the property. 

I have looked into taking out my own buildings insurance policy just for my flat which covers escape of water. It’s a high premium but a much lower excess so may be worth doing. 

My questions for you are:

1. Is there anything wrong with having two building insurance policies running concurrently? (aside from the cost to me)

2. Would having this second policy with a lower excess satisfy mortgage lenders? 

3. Has my management company been negligent in not informing leaseholders of this change in policy?

4. What the hell can we do to get the excess down again quickly so I can sell my flat? The management company have not given any indication of remedial action they will take, only said that if no one makes any claims this year then next year the excess might go down. Surely they need to enforce more than that? Install flood detectors etc? 

1. Only that you need to check the general terms on what happens when other insurance exists on both policies. So for example DL's Home policy states it won't pay out if any other insurance exists, Axa on the other hand says it won't pay out on the Liability section if a more specific policy exists.  So if you bought DL and the Freeholder's policy has no such terms then the freeholder's policy would respond and yours wouldn't. If both say they won't payout if other insurance exists then they both cover the indicident. Needless to say this back and forth between insurers is going to add time and could result in them saying you have no insurable interest or that the freeholders policy takes precedence 

2. Do mortgage providers even receive a copy of the insurance? Don't recall our conveyancers mentioning it at all. Your policy would end as soon as you move out so don't see how it would help? The lender, if anything, would want something perpetual or it to be an undertaking of their customer

3. Read your lease, it says what they should and shouldn't do. Its not unreasonable for them to try and balance the premiums with the excess else you'd have a host of people on here saying their service charge has gone up £2,000 a year because the freeholder has gone for a £0 excess

4. Their only option is to increase the service charge to cover a higher insurance premium... that will equally put people off and make affordability checks harder to pass.

leaseholderwoes

DullGreyGuy said:

leaseholderwoes said:

Hello, I am a leaseholder of a flat which is part of an estate of approx 200 flats. The management company obtain buildings insurance for the entire estate. This year, due to multiple claims made, the excess for escape of water has gone through the roof - £25,000! I am told that each leaseholder is responsible for paying to repair damage to their own flat caused by leaks, even if the leak originated in another flat. So in theory I could have a £25k bill for my neighbour’s negligence. It’s terrifying.

The policy was taken out in Oct 2023 and has not been communicated to leaseholders - I only found out due to the conveyancing process when trying to sell my flat (needless to say my sale fell through).

I’m now being told that this excess could also cause mortgage providers not to lend on the property. 

I have looked into taking out my own buildings insurance policy just for my flat which covers escape of water. It’s a high premium but a much lower excess so may be worth doing. 

My questions for you are:

1. Is there anything wrong with having two building insurance policies running concurrently? (aside from the cost to me)

2. Would having this second policy with a lower excess satisfy mortgage lenders? 

3. Has my management company been negligent in not informing leaseholders of this change in policy?

4. What the hell can we do to get the excess down again quickly so I can sell my flat? The management company have not given any indication of remedial action they will take, only said that if no one makes any claims this year then next year the excess might go down. Surely they need to enforce more than that? Install flood detectors etc? 

1. Only that you need to check the general terms on what happens when other insurance exists on both policies. So for example DL's Home policy states it won't pay out if any other insurance exists, Axa on the other hand says it won't pay out on the Liability section if a more specific policy exists.  So if you bought DL and the Freeholder's policy has no such terms then the freeholder's policy would respond and yours wouldn't. If both say they won't payout if other insurance exists then they both cover the indicident. Needless to say this back and forth between insurers is going to add time and could result in them saying you have no insurable interest or that the freeholders policy takes precedence 

2. Do mortgage providers even receive a copy of the insurance? Don't recall our conveyancers mentioning it at all. Your policy would end as soon as you move out so don't see how it would help? The lender, if anything, would want something perpetual or it to be an undertaking of their customer

3. Read your lease, it says what they should and shouldn't do. Its not unreasonable for them to try and balance the premiums with the excess else you'd have a host of people on here saying their service charge has gone up £2,000 a year because the freeholder has gone for a £0 excess

4. Their only option is to increase the service charge to cover a higher insurance premium... that will equally put people off and make affordability checks harder to pass.

Thanks so much, this is really helpful. Didn’t realise that about point 1, and it is DL I was looking at so that knocks that on the head. 

As for point 2, I assume lenders will be able to access the insurance database and find out this info for themselves. 

Everything you say makes sense - just not what I want to hear of course! Should the management company not try and improve the leaky pipes? 

And where is the freeholder in all of this, why are the leaseholders having to pay for everything when it’s poor plumbing in the building that’s at fault? 

 Thank you! 

Albermarle

Do you know the reasons behind these apparently multiple leaks, why have their been so many?

For what it is worth if you take out buildings insurance on a normal house, then normally it automatically covers all leaks, maybe with a few hundreds Pounds excess. Although some of the very cheap policies have some caveats.
However I presume if multiple claims have been made recently then it would be a different story.

DullGreyGuy

Because its your problem... the freeholder could totally replace all the pipes in the building but before that happens you'd find a Section 20 Major Works consultation notice coming through and you and your fellow 200 leaseholders would be reimbursing the cost of the works plus normally some cost for oversight of the works my the freeholder/managing agency. 

In our previous flat there were an ever increasing number of leaks coming from the roof and the wooden windows were rotting more each year but the freeholder's quote for the scaffolding alone was over £1m and that plus the actual repair/replacement costs would have to be paid for by the leaseholders and so had deemed it better to be paying for the occasional spot repair and defer the massive 5 figure sum per leaseholder for a few years. 

No, there is nothing that they could check to just see the excess, they'd need to ask for a copy of the policy to find out. I think you are thinking of CUE which is a database used by Motor, Home and a few other classes but your freeholder will not be buying "Home" but a form of Commercial Property insurance known as "Block" (or block of flats to give its full name) and doesn't go into CUE.