Building Insurance: Who is Responsible?
20th Mar 2019
Insurance is essential for every block of flats. Each policy is specific to each blocks’ individual circumstances and is usually arranged by either the freeholder, Right to Manage Company or managing agent. The cost is then divided between the each of the leaseholders within the block, as a part of their service charge. Your lease will define what must be covered within the policy
What Needs to Be Covered?
Different providers offer different levels of cover and the freeholder/managing agent should ideally find a policy covering most of the costs for any unforeseen damage. The building insurance should cover all or majority of costs relating to structural damage including loss/destruction of/damage to a building and its grounds.
Blocks of flats should ideally be protected by policies that cover:
- Buildings Insurance – this should represent the full cost of rebuilding the property.
- Communal Contents – including items such as carpet, furniture and curtains.
- Property Owners’ Liability – in case of injury, death or damage to third party individuals i.e. postmen or council employees.
- Employers Liability – if staff are employed such as caretakers or gardeners.
- Directors’ and Officers’ Liability – if an RMC/RTM is in place.
- Plant inspection and break down repair – for any flats that contain lifts.
- Terrorism cover – some mortgage lenders will not loan without it.
Your Legal Rights
Under Section 20 of the Landlord and Tenant Act (1985), freeholders and agents may be required to consult with residents if the individual monthly premium cost exceeds £100 per individual. Most insurances, however, are negotiated annually, so a consultation would only be needed if the cover was longer than 12 months.
You have the right to request a summary of the insurance cover alongside inspecting the associated documents and evidence of premium payments. Upon request, the freeholder will have 21 days to allow inspection free of charge, however reasonable fees can be charged for any copies made. If you find your insurance costs to be unreasonable, you can challenge them at a Tribunal.
The lease will clarify who is responsible for making a claim. In most cases, this will be the freeholder or managing agent. If a cover gives limited time for claims however, you have the right to notify the insurer directly of any damages within building.
As a leaseholder, you will be responsible for contents insurance which will provide cover for your personal possessions. This is items such as furniture, clothing and electrical items. Doubt can sometimes arise when determining what is covered by the contents or building insurance. If an item can be easily removed and taken elsewhere, then it would be regarded as part of the contents of the flat. If a dispute arises about which insurer is responsible for the cover of particular items, the Financial Ombudsman Services recommends each company pays 50% of the claim.
You should also consider the scope of the buildings insurance as it may not extend to damage caused to your flat due to disrepair of a neighbours flat, known as third part liability. You should check whether this applies to your block.
If you’re thinking of renting your flat, it would be advisable to check the insurance arrangements beforehand. The type of tenants and nature of their contracts will be taken into consideration. This is because some may be considered a higher risk i.e. students.
Most policies allow for a flat to be unoccupied for a specified period, usually 30 or 60 days. If left for a longer period of time, the flat is seen as a risk and will need to be regularly inspected by a building manager. You should inform the freeholder/managing agent if the property is left empty for certain periods. Failure to so do could lead to claims being rejected.
Low claim records will usually result in lower insurance premiums and excesses. For these reasons, it is within the interests of all residents to help keep this number low. Insurers report that water damage is the highest cause of claims within flats. Here are a few simple precautions to help your block avoid unnecessary insurance claims:
- Turning off water supply if away for a period of time.
- Have the flats stop tap checked regularly.
- Check all taps are off before going out.
- Do not leave plugs in basins, baths and sinks when away for a period of time.
- Check hose connection regularly i.e. dishwasher
- Don’t leave running taps unattended
- Ensure shower and bath sealants are in good order
Hopefully this information will help make things a little clearer in regard to your block insurance covers. If you ever find yourself unsure, always check the lease or even request to see the insurance arrangement. We advise you to the best you can to help ensure the prevention of claims within your building.