Buying Leasehold Flat - Building insurance seems expensive and will be renewed before my purchase

firsttimebuyer2024

Hello all, 

My offer for a first-floor converted flat (leasehold) in London has just been accepted.  I've asked the vendors to provide me with a summary of building insurance. They paid £2010.82 between 2022-2023 which was split between them and the Ground Floor leaseholder (see the summary of policy below. For 2023-2024, the vendors said they paid a small increase in 2023 -2024 £ 1102 per year (which means the total is £2,204)

To me, the current building insurance seems excessive. My friend has a freehold house and paid only £300 last year. 

Some information about the building: 

• A typical two-storey end Victorian terrace in London with peddle dash rending
• First-floor flat: The vendors used to rent it out the tenant moved out in Feb. 
• Ground floor flat : Has been rented out to a family)
• I've read the lease.  The ground-floor and first-floor leaseholders are responsible for the repair and maintain their respective demised properties. The freeholder doesn't charge any service charge or sinking fund but is obliged to insure the building. 

It would be helpful to hear your thoughts on the following: 

1. Do you think the current policy appears too high considering a relatively standard converted flat in a two storey terrace? 

2. Can you think of any possible reasons why building insurance is that high? 

It seems a bit odd to me that the two leaseholders both have agreed to pay such a substantial building insurance every year. 

3. I assume the current insurance policy runs from 24/06/2023 to 23/06/2024.  So the current policy will be renewed before I become the official leaseholder. 

Normally are the vendors (as the existing owners) expected to pay for the building insurance in full first? 

4.  If the vendors (as the existing owners) won't pay for the upcoming building insurance, I'm worried that it will go up even further, and I will then inherit expensive insurance. I know that insurance has in general gone up substantially this year due to material and labour costs for reinstatement. 

I'm thinking I may try to get some quotes to share with the vendors and ask the vendors to negotiate with the freeholder and ground floor leaseholder. But I'm not sure if it is unreasonable as I'm not a leaseholder yet. 

Have you had any experiences on how to deal with this situation?

 

propertyrental

Who is the freeholder?

What did your surveyor give as the re-build cost?

eddddy

firsttimebuyer2024 said:

I'm thinking I may try to get some quotes to share with the vendors and ask the vendors to negotiate with the freeholder and ground floor leaseholder. But I'm not sure if it is unreasonable as I'm not a leaseholder yet. 

You'll need to get quotes for "Block of Flats Insurance" - even though it's a house converted into 2 flats.

You won't be able to get online quotes, you'll have to go to a broker.

There might have been some claims (which you won't know about) which could impact premiums.



Typically, the insurance premium will be 'allocated' according to the completion date.

For example, if the current owner pays for 365 days insurance on 24/06/2024 and you complete 20 days later on 14/07/2024 - you will pay the seller 345/365ths of the premium to cover the 345 days that you'll own the flat. (Your solicitor will do the calculations.)

firsttimebuyer2024 said:

4.  If the vendors (as the existing owners) won't pay for the upcoming building insurance, I'm worried that it will go up even further, and I will then inherit expensive insurance.

I'm not quite sure what you mean here.

But if the freeholder has sent the current leaseholder a valid service charge demand for the insurance, your solicitor should ensure it's paid on completion by the seller.

(But it might be worth telling your solicitor that the bill is expected around that time, to make sure they are aware.)

DullGreyGuy

Block insurance (short for Block of Flats insurance, a form of commercial property) is a very different beast to mass market consumer home insurance and typically is much more expensive. There are a few providers that specialise in small developments, like house conversions, but outside of those you are looking at a broker. 

The price is high, in my opinion, but dont know what the claims history is like. At the same time the excesses, AA etc are better than many which will in part explain the price. We've had a few on here where they've discovered their Buildings cover from the freeholder has a £5,000 excess or no alternative accommodation cover etc. 


Is the rebuild cost accurate? In principle it looks high.