Insuring mixed-use building (businesses/flats)

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  • Insuring mixed-use building (businesses/flats)

    I am posting this as a reply as it seems relevant. However, if this should really be a new thread, please tell me and I shall re-post it.

    I own the lease on a flat within a building in Norfolk. The extended Ground Floor is Commercial and the other three floors Residential - 10 flats. Each of the leases has about 15 years to run. Unfortunately it seems Residential takes up less than 75% so RTM is not possible.

    The lease specifies that each of the flats is responsible for 10% of the Buildings Insurance cost of "The Block", where "The Block" is defined as the upper three floors only.

    The Insurance premium for the Block is around £4000 - being around £1.90+tax per £1000 (which seems high) on a sum insured of just over £2 million. The Buildings Declared Value is £1,575,000, so the Sum Insured is 30% higher (which seems just about acceptable from what I read). Although I recognise that the Buildings Declared Value will not be the same as the Market Value, each of the flats sells at less than £60k - meaning the whole "Block" would sell at less than £600k. The Buildings Declared Value is therefore almost three times the Market Value, which seems very strange.

    It seems to be that the Rebuilding Cost is excessive and compounded by the 30% uplift to Sum Insured, and the high premium per £1000, we leaseholders are paying far too much.

    A few related questions:

    1) Does it sound like I have a reasonable case?

    2) If I do have a case, how should I go about challenging it?

    3) If I challenge it, I will presumably need to show alternative quotes. How do I obtain these as I do not have authority to enter the flats apart from my own?

    4) How is it possible to obtain a "rebuilding" cost for just the top three floors of a four-story building?

    The Head-Leaseholder and Managing Agent are part of the Regis.Pier Management Group, so we cannot expect any cooperation!


    Many thanks

  • #2
    Originally posted by MickyV View Post
    I am posting this as a reply as it seems relevant. However, if this should really be a new thread, please tell me and I shall re-post it.

    I own the lease on a flat within a building in Norfolk. The extended Ground Floor is Commercial and the other three floors Residential - 10 flats. Each of the leases has about 15 years to run. Unfortunately it seems Residential takes up less than 75% so RTM is not possible.

    The lease specifies that each of the flats is responsible for 10% of the Buildings Insurance cost of "The Block", where "The Block" is defined as the upper three floors only.

    The Insurance premium for the Block is around £4000 - being around £1.90+tax per £1000 (which seems high) on a sum insured of just over £2 million. The Buildings Declared Value is £1,575,000, so the Sum Insured is 30% higher (which seems just about acceptable from what I read). Although I recognise that the Buildings Declared Value will not be the same as the Market Value, each of the flats sells at less than £60k - meaning the whole "Block" would sell at less than £600k. The Buildings Declared Value is therefore almost three times the Market Value, which seems very strange.

    It seems to be that the Rebuilding Cost is excessive and compounded by the 30% uplift to Sum Insured, and the high premium per £1000, we leaseholders are paying far too much.

    A few related questions:

    1) Does it sound like I have a reasonable case?

    2) If I do have a case, how should I go about challenging it?

    3) If I challenge it, I will presumably need to show alternative quotes. How do I obtain these as I do not have authority to enter the flats apart from my own?

    4) How is it possible to obtain a "rebuilding" cost for just the top three floors of a four-story building?

    The Head-Leaseholder and Managing Agent are part of the Regis.Pier Management Group, so we cannot expect any cooperation!


    Many thanks
    Market value is irrelvant to the sum insured especially with such short leases.

    What were the original length of the leases for the flats?

    Unless the leases are the very few that are exempt see above, I would form a recognised tenants association and exercise the right to appoint a surveyor or have a management audit, to form the basis to either arbitrate ( ha ha ) or challenge these at the LVT.
    Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

    Comment


    • #3
      Sorry. I have just re-read my post and see my fat fingers missed a zero The leases have 150 years left to run, not 15!

      Comment


      • #4
        Originally posted by MickyV View Post
        Sorry. I have just re-read my post and see my fat fingers missed a zero The leases have 150 years left to run, not 15!
        OK not immune to that myself! Keyboards are one size and no good for a former props hands....

        Then the TRA is the best option to organise.
        Its worth explorining if the head lease is only of the flats and the layout appropriate, as RTM may still be possible. The Surveyor can advise you on that

        http://www.rpts.gov.uk/pubs_and_form...et%205_TA5.pdf TRAs

        http://www.lease-advice.org/publicat...nt.asp?item=24 Surveyor/Audit
        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

        Comment


        • #5
          'TRA'? Is that meant to be 'RTA', 'RTM', or what else?
          JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
          1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
          2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
          3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
          4. *- Contact info: click on my name (blue-highlight link).

          Comment


          • #6
            Originally posted by jeffrey View Post
            'TRA'? Is that meant to be 'RTA', 'RTM', or what else?
            Acronym poisoning again!

            RTA recognised tenants association RTA residents and tenants association TRA Tenants and Residents Association

            The latter two are used where "renters",freehold house owners in mixed schemes, even long boat owners, are included in the association, but do not partake for the purposes of say "section 20" consultation or the audit above.
            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

            Comment


            • #7
              Thank you both.

              I shall try to set up an RTA (I think that's the one!) as you suggest. But as the flats are mostly sublet, that might take some time.

              In the meantime, are you able to answer the two remaining questions:

              1) Does it sound like I have a reasonable case?

              4) How is it possible to obtain a "rebuilding" cost for just the top three floors of a four-story building?

              Also, if I cannot get the RTA together in a timely way, is there anything I can do on my own?

              Comment


              • #8
                1. Hard to say as there are so many factors that can only be assessed without knowledge of the building policy and claims history. It's easy to say the rate should be x, however that relies on assumptions that may not apply.

                4 Yes it is, but it takes detailed knowldege and an examination of the lease as to who is responsible for repairing what, the obligations to each other if there is more than one party, and who then insures and on what basis.

                As an individual you can still challenge the charges by taking advice locally on these matters. I don't think that you will get very far in discussion or mediation asking for a copy of the schedule and policy, when the last valuation was carried out to ensure cover is correct ( ideally every 3- 5 years), and an explanation of the insurance cover relative to the obligations to insure the flats, the commercial units and any common areas eg parking paving etc.

                But having done so it helps the case to apply to the LVT as they are reasonable questions. Professional advice will add detial and evidence to that argument
                Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                Comment


                • #9
                  Originally posted by leaseholdanswers View Post
                  Acronym poisoning again!

                  RTA recognised tenants association RTA residents and tenants association TRA Tenants and Residents Association

                  The latter two are used where "renters",freehold house owners in mixed schemes, even long boat owners, are included in the association, but do not partake for the purposes of say "section 20" consultation or the audit above.
                  OK. But even setting-up an RTA does not change leaseholders' status/obligations. Only RTM/RTE will do that.
                  JEFFREY SHAW, solicitor [and Topic Expert], Nether Edge Law*
                  1. Public advice is believed accurate, but I accept no legal responsibility except to direct-paying private clients.
                  2. Telephone advice: see http://www.landlordzone.co.uk/forums/showthread.php?t=34638.
                  3. For paid advice about conveyancing/leaseholds/L&T, contact me* and become a private client.
                  4. *- Contact info: click on my name (blue-highlight link).

                  Comment


                  • #10
                    1. How big are the flats which you say are currently valued 60K each ? How many sq ft inside each unit ?

                    2. Write a letter to the managing agent or the one which issues the demand to request

                    a "summary of the building insurance cover",
                    a declaration of the amount of commission take under the policy
                    details of past 3 years claims record.
                    and copy of the alternative competitive quotes at last renewal.

                    and send ithis request by registered post ( to confirm the request letter date.) Its a criminal offence if they do not reply within 30 days with summary of insured cover.

                    3. Then you can use the "summary of insured cover" to obtain competitive quotations from other brokers . You should find the charge rate per 1000 pds of insured building cover is lower than 1.90 + VAT.

                    4. Measure the area of the building base ( footprint area ) in sq ft and multiply by 4 floors to give total floor area and multiply by 100pds per sq ft re-building cost to get a rough figure for rebuilding costs and compare with the "declared Building value figure".

                    Comment


                    • #11
                      It rather does. As an RTA, the appointment of a surveyor or an audit gives access to documents and the premises that an individual lessee does not as well as easier access to those they could through other means, eg the commericial leases.

                      That then, and as a group, allows the sharing of costs for an LVT application that may change the apportionment. It then is the basis for organising RTE/RTM, but the OP believes that the premises would be exempt under the respective Acts due to area.
                      Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                      Comment


                      • #12
                        Originally posted by Gordon999 View Post
                        1.
                        a declaration of the amount of commission take under the policy
                        details of past 3 years claims record.
                        and copy of the alternative competitive quotes at last renewal.
                        While do not stop this from asking those questions, "section 30A" does not require any of this to be declared.

                        The request must be made on the landlord, addressing solely to an agent who is not party to the lease, is not a valid request:

                        Write to eg ABC Freehold ltd at address as shown on invoices under section 47 and 48, and a letter to the agent as agent for the freeholder ABC freehold.
                        Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                        Comment


                        • #13
                          Many thanks, Gordon.

                          1. The flats are approximately 450-500 square feet each.

                          2. I shall write as you suggest.

                          3. I shall do as you suggest.

                          4. Because the flats occupy only about 65-70% of the 4 floors - and the definition of "The Block" recognizes this in the lease for insurance purposes - should I be be taking the calculation you suggest and then multiplying it by 65-70% to get the proportion of the "declared Building value" that relates to the policy?

                          Comment


                          • #14
                            Originally posted by MickyV View Post

                            2. I shall write as you suggest.

                            3. I shall do as you suggest.

                            4.
                            Sadly you have no right to insist that they provide this, and they no obligation to. An auditor or appointed surveyor does however, if they refuse to provide it, as part of inspecting the documents under those rights. I hope they take the simpler option, But if they dont then you know what to do.
                            Based on the information posted, I offer my thoughts.Any action you then take is your liability. While commending individual effort, there is no substitute for a thorough review of documents and facts by paid for professional advisers.

                            Comment


                            • #15
                              Many thanks, leaseholdanswers.

                              I do apologise that I did not spot your previous posts before replying to Gordon.
                              Understood. I shall make sure I write to the landlord - or Head Leaseholder in this case. Given their reputation, I doubt they'll take the simpler option but now I know I have no grounds to demand they do!

                              Gordon was asking the square footage of the flats. I guess to see whether the rebuilding cost sounds correct or not?

                              Are either of you able to answer my question 4. - Because the flats occupy only about 65-70% of the 4 floors - and the definition of "The Block" recognizes this in the lease for insurance purposes - should I be be taking the calculation you suggest and then multiplying it by 65-70% to get the proportion of the "declared Building value" that relates to the policy?

                              Comment

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