Small block of 6 flats with no block policy insurance?

by Readers Question

11:22 AM, 26th April 2016
About 3 years ago

Small block of 6 flats with no block policy insurance?

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Small block of 6 flats with no block policy insurance?

I have a flat in a small block of 6 flats. We do not have a communal entrance or communal hallways. Each flat has its own individual front door, almost like a house. As per terms of the lease, Freeholders do not provide us with block insurance or any maintenance. We each maintain our own flat and individually insure our own flat.block policy insurance

I am thinking of selling the flat. Does the lack of Block Building Insurance means that my lease has a defect? In your experience would prospective buyers have difficulty getting a mortgage against my flat due to this lack of Block Building Insurance?

Does anyone have come across this before?

I appreciate any help or advice that you can give me.

Martina



Comments

Neil Patterson

11:24 AM, 26th April 2016
About 3 years ago

Hi Martina,

My understanding is you can't individually insure part of one building. You have to have one block policy covering the entire building and its value.

However I will ask our insurance expert Jason to comment for us 🙂

Jason McClean

11:31 AM, 26th April 2016
About 3 years ago

Hi Martina

The leaseholder is responsible for the building insurance. You cannot insure another person's property (your flat that you lease from them).

If you are insuring directly yourself, you will need to explain the situation to the broker. The problem may go unnoticed until a claim is made and then rejected on the basis of you are not the owner of the property.

My suggestion is to speak with a specialist broker and ask for advice directly - try calling 0800-612-5764 that is the Property 118 recommended broker Discount Insurance and they will be able to talk through all products available to you.

Sash D

13:39 PM, 26th April 2016
About 3 years ago

Hi

I have the same issue

The issue is that in my block there are four flats and each has a different insurance company, if there is a problem then it will be a nightmare to resolve as each insurance company will no doubt try to be the onus on each other and in the end will refuse to payout. The bigger problem is if one of the flats is uninsured.

Actually our freeholder has written to the leaseholders to agree to let them insure the whole building but for some reason all the other three leaseholders have refused. Ironically the cost of the freeholder insuring the whole building is cheaper than the four flats insuring the separate parts.

I think there will be a problem selling the flat but it will not be the mortgage company that will put a stop to it but the solicitors will point it out and your buyers will start having second thoughts I have noticed that it does affect the value of the property considerably.

I would suggest you hold a meeting with the freeholders and other leaseholders to persuade them to have one insurance in place (even if it does cost a little more) as basically the insurance on paper maybe worthless.

Kind Regards

Sash

ray selley

14:54 PM, 26th April 2016
About 3 years ago

I own several flats spaced around a Bovis mixed development built about 5 years ago.All the flats have their own street entrances are in blocks of four and all are insured individually.A great many of of the flats have been bought and sold since new and i understand from my estate agent contacts without any mortgage difficulties

Mike McDonagh

15:15 PM, 26th April 2016
About 3 years ago

Hi Martina,
I have never come across a satisfactory "self insure" buildings arrangement for flats or maisonettes. You say there are no communal areas or entrances but who is covering the roof, the external walls and the foundations.
You cannot have multiple policies covering common risks.
The lease may say that the freeholder does not provide insurance but does it not devolve responsibility to either a management company or leaseholder collective.
Under your current arrangement it would seem that if you suffer a lightening strike or subsidence everyone involved will lose everything as individual policies will not cover those risks.
I am surprised any solicitor has allowed a purchase to be made with no building insurance in place.
I suggest with only 6 flats involved you speak to the other 5 leaseholders and take out a full buildings cover and share the cost.
Good luck, Mike

Sash D

15:39 PM, 26th April 2016
About 3 years ago

Reply to the comment left by "ray selley" at "26/04/2016 - 14:54":

There will always be a buyer and mortgage companies willing to lend. However, in my experience a defective lease will no doubt reduce the value of the property and increase the likelihood of the sale falling through.

I can see envisage in future insurance companies refusing to insure such properties due to the risk involved. There are only a few already willing to take the risk.

ray selley

16:11 PM, 26th April 2016
About 3 years ago

I am going to check with my insurers but a glance at the policy key facts states "Cover Offered-- Replacement value of the property following loss or damage by the insured perils ie Fire Explosion Flood subsidence etc etc.So it looks like if the adjoining flats are not insured or under insured while i might not get my flat back at least i will receive its value

Jason McClean

16:17 PM, 26th April 2016
About 3 years ago

I think if you find yourself in a position where the freeholder is placing the burden of insurance on the leaseholder you are in a tight spot. You need to speak with a specialist provider and get advice or you could be uninsured come a claim. In most cases it is the freeholder needs to insure the property and the leaseholder cannot insure the property.

Get on the phone is my advice. I expect you will end up speaking with the freeholder and telling them to get a block policy in place. Doesn't sound like a decent or professional landlord.

Sash D

16:40 PM, 26th April 2016
About 3 years ago

What can you do if the freeholder is willing to take on the insurance but all the other the leaseholders have refused

Steve Masters

16:42 PM, 26th April 2016
About 3 years ago

I had a similar situation and my solicitor arranged a one off "indemnity policy" which I was told insured against the other flat owners not having sufficient insurance should the block need to be rebuilt. I don't know the exact details, I took her word for it.

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