Insurance on freehold block of flats

jbrassy

I'm currently in the process of buying a new house which is a top-floor maisonette flat above another flat. The building is a former terraced house which has been converted into two flats. As part of the purchase, I will own the freehold for the whole building (not just share of freehold), so I will be the freeholder for the downstairs leasehold flat. 

As the freeholder, I will be required to arrange the buildings insurance for the whole building. I don't mind doing this, although I've never purchased buildings insurance before (I used to live in a leasehold flat) so a bit unsure about what the right thing to do is. The seller (i.e. current owner) sent me through the current buildings insurance policy which is with Direct Line. The policy cost around £750 and it simply listed the owner of the downstairs leasehold flat as an 'Other interest' and made them a joint policyholder. Direct Line do not allow you to change the name on the policy, so when we complete the purchase, we will need to take out a new policy ourselves.

What I want to know is, are Direct Line suitable when it comes to providing buildings insurance on blocks of flats, even when it's only 2 flats within a converted terraced house?

When I lived in a leasehold flat previously (which was also in a converted terraced house), the freeholder went through a broker to arrange freehold block of flats insurance. I have similarly approached a few brokers (such as AJ Gallagher) to get some quotes and the prices are much higher compared to Direct Line (we're talking £1500+). 

On the one hand I would like to just get a cheaper policy from Direct Line (or a similar insurance company). However, I am nervous that Direct Line do not provide adequate cover or would point to some clause in the policy which means they wouldn't pay out if something went wrong. Any advice people can provide would be much appreciated. 

DullGreyGuy

Is it Direct Line or Direct Line for Business?

Almost certainly Direct Line won't cover a building with two dwellings in it under a standard home insurance policy. You technically need Block of Flats insurance which is a type of commercial property insurance, there are a few middle men out there offering schemes aimed at small blocks/conversions like yours but the rest of the market is mainly done via brokers. Commercial insurance is typically notably more expensive than personal lines!

jbrassy

DullGreyGuy said:

Is it Direct Line or Direct Line for Business?

Almost certainly Direct Line won't cover a building with two dwellings in it under a standard home insurance policy. You technically need Block of Flats insurance which is a type of commercial property insurance, there are a few middle men out there offering schemes aimed at small blocks/conversions like yours but the rest of the market is mainly done via brokers. Commercial insurance is typically notably more expensive than personal lines!

I have a copy of the current policy that the seller sent through. There is no indication on the policy schedule that it is a Direct Line for Business policy so I can only assume it's a standard home insurance policy. 

I have obtained quotes from three brokers: Gallaghers, Crosby, and UK Insurance Net. Are there any other brokers or organisations that you would recommend I contact for a quote? 

Thanks again for any help people can provide. 

DullGreyGuy

jbrassy said:

DullGreyGuy said:

Is it Direct Line or Direct Line for Business?

Almost certainly Direct Line won't cover a building with two dwellings in it under a standard home insurance policy. You technically need Block of Flats insurance which is a type of commercial property insurance, there are a few middle men out there offering schemes aimed at small blocks/conversions like yours but the rest of the market is mainly done via brokers. Commercial insurance is typically notably more expensive than personal lines!

I have a copy of the current policy that the seller sent through. There is no indication on the policy schedule that it is a Direct Line for Business policy so I can only assume it's a standard home insurance policy. 

I have obtained quotes from three brokers: Gallaghers, Crosby, and UK Insurance Net. Are there any other brokers or organisations that you would recommend I contact for a quote? 

Thanks again for any help people can provide. 

It's not a class of insurance I've ever had to buy so not one I can recommend brokers for. It sounds like a fairly standard risk so you are just looking for the one with the slickest processes which are therefore likely to be able to get the best quotes. 

I have the opposite problem in that I have a very niche need when it comes to my business insurance but need to find a scheme in which I fit  rather than "open market at Lloyds". I find smaller brokers are more hungry for the business than massive outfits like Gallaghers but ultimately it comes down to who they know. I'm currently insured via an MGA backed by big name insurers but almost no one has heard of them and so most brokers dont approach but mine did and their prices are tiny compared to most who quote (most won't quote me at all). 

So whilst your probably best going for a slick low margin broker a smaller outfit that happens to know an MGA wanting to grow their book in small conversions may be able to undercut them. 

So in a long way the answer is shop around, though some brokers won't be too happy as they say they do the shopping for you so you can be loyal to the brokerage. 

BonaDea

We have the same: converted building, 4 flats, 4 leaseholders bought the freehold so we are responsible for insuring the building.  You do need proper commercial insurance and personally I'd be very mistrustful of the Direct Line policy - when I took over sourcing the insurance I found that all the home insurers I tried said they couldn't insure us, once I'd explained the set up.  (Can't remember definitely whether I tried DL, though.)  These policies don't cover contents so individual leaseholders have to take out their own if they want that.

We've been happy with Landsdowne Insurance Brokers in Cheltenham.  They seem to specialise in flats and weren't fazed that we aren't a large purpose-built block.  Our most recent annual policy cost c.£1900, but we are in London.

AlexMac

When I was responsible for insuring our shared freehold conversion building (a London mansion of six leasehold flats, with all six owners as freehold company owners, so not quite the same) we used Lansdowne Insurance brokers of Cheltenham.  Described on their website as expert for your sort of cover

They placed us at a competitive rate with AVIVA, who were brilliant when we had a major claim; tens of thousands in water damage and lost rent/ alternative accommodation costs. 

I was so impressed that when I later bought another flat in a shared freehold, I took over as treasurer and switched to them; with a significant reduction in premium 

onemouseplace

I used to use UK Insurance Net after I had to sort out block insurance very quickly when we realised (after a few years of just renewing!) that the policy our sellers had used and we'd taken over was actually just a house insurance policy for the number of bedrooms rather than block insurance!! They were fine, but we also used SJL Insurance Services on recommendation from a friend one year who managed to get us a cheaper quote and were good as well.

propertyrental

As an aside, make sure you fully understand all your responsibilities as freehold, not just insurance.

And understand the risk and processes if, for example, the leaseholder downstairs fails to pay their 1/2 of the insurance, the ground rent, or other costs.

jbrassy

Thanks everyone for your responses. I will certainly contact Lansdown for a quote on the insurance.

@propertyrental - do you know any good websites / resources to help with this? I am aware I will have extra responsibilities as the freeholder and want to make sure I do it all properly, but not sure where to turn.

Thanks all for your help