Can a leaseholder iinsure against losing the right to the benefits of that lease

[GaryM0021]

I am in the process of buying a 250yr lease on an apartment in a building that is being converted from an existing office block. The lease states that the landlord is responsible for arranging insurance for the building ( the cost is met from the service charge) & is obligated to use any insurance monies received to reinstate the building in the event that it is damaged or destroyed. However there is a clause that gives the landlord relief from this obligation in a limited number of circumstances, for example if permission cannot be obtained from the local authority to reinstate the building.

If the building cannot be reinstated there is provision in the lease for insurance monies received to be shared between the landlord & the tenants in proportion to their respective interests in the premises BUT as I understand it the building can only be insured for the rebuilding cost, and that will be significantly lower than the value of all the leases than tenants have taken out on flats within that building. So each tenant would be left homeless and only entitled to a payout equal to a fraction of the amount that their leasehold flat was worth with which to buy a replacement home.

So my question is, does anybody know if owners of leasehold flats can buy insurance against the loss of the value of their lease if the building in which that flat is housed is destroyed & not reinstated?

[landlord-man]

Cannot answer the actual question BUT ensure the Insured amount also covers the site clearance - so even if the building cannot be re-built, the site would still have to be cleared (including all the environmental nasties in an older building).

Personally, I would NEVER touch such a property, but each to their own I guess.

[L4NDLORD]

No local authority would object to residential being built on the site of a former office building BUT you do make one very good point. Under the legislation there was initially no restriction on how small apartments could be built. Hence unscrupulous developers built miniature apartments, modern bed sits really. In the event of a catastrophic loss necessitating rebuilding the work would need to be done to current building regulations, for which higher minimum spaces provide.

[GaryM0021]

Hi , thanks for your replies.

LANDLORD I appreciate your general point but I am not concerned with this landlord being hamstrung by new regulations regarding minimum space as the place I am buying is over 170 sq metres, which, is well above what any minimum build size is ever likely to be.

I can actually envisage circumstances where a local authority may not permit a property to be rebuilt even though it had granted planning permission for it to be built in the first place. If for example a building were destroyed and there was significant loss of life, as in the Grenfell fire local feeling may dictate that the site shud be left as a memorial. It wud be interesting to know if anybody in the Grenfell Tower had bought their property under right to by & where they stand if, as is likely it isn't rebuilt.



landlord-man Cud I ask what you mean when you say that you would never touch such a property. What is it specifically that concerns u. Other than the issue I have raised, which is a general point about leasehold flats is there something about this one that I am missing. Thanks

[Section20z]

Of course, you can insure against pretty much anything legal but it does seem an unlikely scenario and a sensible clause. If the LA insisted on different minimum size apartments then you might get less on the site and same problem would occur.
Be worth checking if the insurance has alternative accommodation cover so you wouldn't be homeless.
I would be more concerned about ground rent, management and service charge and that's why I would walk away

[Jon66]

Yes I agree with Section above, I wouldn't touch a leasehold at this moment in time due to the very weighted legislation in favour of the landlord freeholder.

[L4NDLORD]

In my view the legislation tends to favours the leaseholders

[GaryM0021]

Thks for all your contributions. I tend to agree with LANDLORD, I think there is now a lot of legislation in place to protect leaseholders, like to right to buy the freehold & right to manage the building. If I were buying in a converted house with say 3 flats I wud be more concerned cos any legal action u need to take to exercise your rights cud work out to be very expensive when just shared between 3 parties, but the block I am looking to buy in has 325 apartments so in my opinion the landlord or a management company will think twice before abusing their position. There is something to be said for strength in numbers