High Insurance premiums from the freeholder

christos00

I bought the flat in which I live with my partner 5 years ago.It's a one-bedroom flat in a converted two-flat house. The freeholder owns and rents the 1st floor flat (HMO). When I bought the flat the lease was extended for 100 years or so
Every year, they ask me to split the insurance premiums that they arrange. Although there has been no claim on the property, the premium each year is about £1600, so every year I pay about £800, which sounds excessive to me.  I suspect the high premium may be attributed to the other flat being operated as a House in Multiple Occupation (HMO).

Do you also think that a premium of £800 for my 1 bedroom flat is excessive? If I were to buy the freehold, would the premium go down? How much would buying the freehold cost approximately, given the the lease has been renewed recently?

Any other advice?

Many thanks!

Mark_d

The premium does sound a lot but of course the premium depends on a lot of things - such as the size of the property, listed building status, the age and construction of the property, subsidence/flooding risks...

There's no reason to think the insurance would change if it's in your name as oppose to the current freeholder's name.  If you want to buy the freehold from the current freeholder, you should negotiate a price with that person.

eddddy

christos00 said:

If I were to buy the freehold, would the premium go down? How much would buying the freehold cost approximately, given the the lease has been renewed recently?

Has the current freeholder indicated that they would sell you the freehold of the building?

In the situation you describe, you cannot force the freeholder to sell the freehold building to you.

And since the freeholder 'owns' the 1st floor flat, it seems unlikely that they would sell you the freehold of the building.

anselld

HMO would imply the first floor flat is at least a three bed.  It seems un unusually unbalanced arrangement both physically and in terms of the split of costs.  Does the lease specify 50:50 split of costs?

Have you seen the policy details and the actual quotations for this policy?  Does the cover level look correct?  Is there any evidence of the market being tested for alternative qutations?  I doub't HMO makes a significant difference if a suitable provider is used.

christos00

Thank you for your comments - very helpful

Mark_d said:

The premium does sound a lot but of course the premium depends on a lot of things - such as the size of the property, listed building status, the age and construction of the property, subsidence/flooding risks...

There's no reason to think the insurance would change if it's in your name as oppose to the current freeholder's name.  If you want to buy the freehold from the current freeholder, you should negotiate a price with that person.

The building isn't listed, there's no history of subsidence, flood etc. AFAIK there's nothing special about the building. 
You're right that the premium won't change with a change of name, but wouldn't it be substantially cheaper for me when I won't be splitting with the freeholder? (check the response below too)

eddddy said:

Has the current freeholder indicated that they would sell you the freehold of the building?

In the situation you describe, you cannot force the freeholder to sell the freehold building to you.

And since the freeholder 'owns' the 1st floor flat, it seems unlikely that they would sell you the freehold of the building.

No, there has been no discussions yet. But why are you saying that I can't force them to sell (the share of the freehold)? I can't post a link here, but from an online search I understand that I have the right to buy a share of the freehold. Am I wrong?

anselld said:

HMO would imply the first floor flat is at least a three bed.  It seems un unusually unbalanced arrangement both physically and in terms of the split of costs.  Does the lease specify 50:50 split of costs?

Have you seen the policy details and the actual quotations for this policy?  Does the cover level look correct?  Is there any evidence of the market being tested for alternative qutations?  I doub't HMO makes a significant difference if a suitable provider is used.

Yes, that's correct, the 1st floor flat is a 3-bedroom HMO. The lease doesn't specify the split, but does say that the landlord is responsible for arranging the insurance. 
The policy looks reasonable, but I doubt other quotations have been sought. I did ask them about this in previous years, but I guess they didn't want the hassle (they are pretty old)

Thanks again
  

DullGreyGuy

They are presumably doing the right thing and are buying Block Insurance? If they are then that would explain a lot of the price because its a form of commercial property insurance and therefore the level of competition and pricing sensitivity is very different compared to personal lines home insurance. 

Normally with block insurance there would be no questions about the occupants or if a property is a HMO etc because in many cases the freeholder would have no idea, all they'll know is who the leaseholders are and little else. 

If they are willing to sell you the freehold would make no difference to the premiums, you maybe could try other brokers to see if they can do Block Insurance for a lower price. Unfortunately some inexperienced people try to buy Home or Landlords insurance and then find at claims stage that the policy is void as its for a single dwelling not a building with multiple dwellings in it.

eddddy

christos00 said:

But why are you saying that I can't force them to sell (the share of the freehold)? I can't post a link here, but from an online search I understand that I have the right to buy a share of the freehold. Am I wrong?

Unfortunately, you are wrong.

This is probably an example of what you've read about:

• If a building contains 2 leasehold flats, the 2 leaseholders can club together to buy the freehold of the building. (Both leaseholders need to agree to this.)

• Then each leaseholder would become a joint owner of the freehold

• Estate Agents call that arrangement "share of freehold"

So in your case it's unlikely that the leaseholder of the flat upstairs would club together with you to force the freeholder to sell the freehold...

...because the leaseholder of the flat upstairs is also the freeholder.

christos00

That's super useful, many thanks. 

DullGreyGuy said:

They are presumably doing the right thing and are buying Block Insurance? If they are then that would explain a lot of the price because its a form of commercial property insurance and therefore the level of competition and pricing sensitivity is very different compared to personal lines home insurance. 

So, just to get it right, you're telling me that the correct way to insure a house converted into two flats, is always to get a "block of flats insurance"? One should never go for two separate insurances, correct? And in that case, the block insurance is commercial, thus more expensive, independent of how each flat is being used (i.e. rented or not).  

eddddy said:

Unfortunately, you are wrong.

This is probably an example of what you've read about:

• If a building contains 2 leasehold flats, the 2 leaseholders can club together to buy the freehold of the building. (Both leaseholders need to agree to this.)

• Then each leaseholder would become a joint owner of the freehold

• Estate Agents call that arrangement "share of freehold"

So in your case it's unlikely that the leaseholder of the flat upstairs would club together with you to force the freeholder to sell the freehold...

...because the leaseholder of the flat upstairs is also the freeholder.

Right. So, that means that one doesn't have the right to buy a share of freehold on their own, is that correct? And based on DullGreyGuy, even if one could, it wouldn't matter much because the building would still need a commercial insurance. 

You're saving me from a what seems to be a quite unnecessary dispute, thanks! 

DullGreyGuy

christos00 said:

That's super useful, many thanks. 

DullGreyGuy said:

They are presumably doing the right thing and are buying Block Insurance? If they are then that would explain a lot of the price because its a form of commercial property insurance and therefore the level of competition and pricing sensitivity is very different compared to personal lines home insurance. 

So, just to get it right, you're telling me that the correct way to insure a house converted into two flats, is always to get a "block of flats insurance"? One should never go for two separate insurances, correct? And in that case, the block insurance is commercial, thus more expensive, independent of how each flat is being used (i.e. rented or not).  

eddddy said:

Unfortunately, you are wrong.

This is probably an example of what you've read about:

• If a building contains 2 leasehold flats, the 2 leaseholders can club together to buy the freehold of the building. (Both leaseholders need to agree to this.)

• Then each leaseholder would become a joint owner of the freehold

• Estate Agents call that arrangement "share of freehold"

So in your case it's unlikely that the leaseholder of the flat upstairs would club together with you to force the freeholder to sell the freehold...

...because the leaseholder of the flat upstairs is also the freeholder.

Right. So, that means that one doesn't have the right to buy a share of freehold on their own, is that correct? And based on DullGreyGuy, even if one could, it wouldn't matter much because the building would still need a commercial insurance. 

You're saving me from a what seems to be a quite unnecessary dispute, thanks! 

It is the better way to do it because the whole building is under 1 contract. 

If the leases were changed to make the leaseholder responsible for buying their own insurance then that is possible and then each person insures their own demise and no one insures any common parts. This obviously becomes a much more risky approach... let's say a big event happens that damages your property, their property including the roof... your insurers arent going to be willing to do any work on your property until the roof is fixed and the building is water tight again, your neighbour above talks to their insurers who void their policy because they made false declarations... your insurers arent going to pay for the whole building to be repaired and your neighbour may not be able to afford to pay for such big work. 

This type of approach used to be common in Scotland where leasehold doesnt exist but its more common now for a factor company to buy Block Insurance and charge it back to the owners via a service charge. 

christos00

That make sense. Thanks for the help and the detailed explanation