what must building insurance actually cover if organised by RMT's

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    what must building insurance actually cover if organised by RMT's

    Hi, I'm new to the forum and wondered if anyone can help with the following,

    Just wanted to know if an RTM is formed at our block of flats and is taking over the obligations of the landlord what does the building insurance have to cover e.g. common parts and public liability etc as well as rebuild and insurance against flood? Do the freeholders have a right to be a party to the policy and do they have the right to a copy of the certificate, policy statement if they are no longer doing it?

    Any help would be appreciated. Thanks
    Last edited by HBB; 06-05-2014, 15:17 PM. Reason: spelling mistake

    #2
    Please see the link below.

    http://www.landlordzone.co.uk/forums...locks-of-flats

    If you still have any queries after reading, please ask again.

    Comment


      #3
      The freeholder has no right to be party to the policy unless the lease makes that requirement and would have to be specifically worded which would be most unusual to work with a RTM assumption of powers.

      that said whats the harm- its your prerogative and right to insure and most insurers will email a copy policy and schedule ( some won't even do paper unless you pay) and forward it on as the freeholder is worried that their investment is adequately insured. Having won the RTM battle be generous in victory as after all on some matters such as notices assignments and alterations even enforcement of else terms, you may well need his cooperation and help.

      Of course if as your title implies its being organised by the "RMT" expect strikes........
      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


        #4
        Originally posted by leaseholdanswers View Post
        The freeholder has no right to be party to the policy unless the lease makes that requirement and would have to be specifically worded which would be most unusual to work with a RTM assumption of powers.
        Whilst I do not doubt that you know far more about the right to manage than I do, are you sure that that is correct? I have had a quick look at the Act and it seems that:

        (a) an RTM is empowered to do various things including insure;

        (b) subject to (c), a landlord cannot do anything which an RTM can or may do;

        (c) a landlord may insure the premises at his own expense.

        Whilst (c) would seem to envisage the possibility that an RTM will insure in its own name and/or that of the tenants, the Act is not explicit about who should be the insured under the policy. Are there any tribunal rulings on the point?

        Whatever the position, double insurance is always best avoided.

        Comment


          #5
          Absolutely sure. In the case of an RTM they insure in their name as they become the landlord by virtue of teh Act. When I have a minute I'll detail that.
          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


            #6
            If you re-read s96 -98 you will see as posted earlier that the RTM becomes the landlord and therefore as it says therein any reference to the landlord should be read as RTM ( re-entry and certain consents aside) therefore his covenant to insure becomes theirs.

            It is therefore quite explicit.

            If CLRA 2002 sends you or the OP to sleep here is the LEASE extract

            Management functions and responsibilities

            On the acquisition date, the RTM company takes over all of the management functions for the premises under the lease. Normally these will be the functions directly exercised by the landlord, but in some cases may have been delegated to another party to the leases or to a management company. However, no matter who is responsible for managing the property, the functions pass to the RTM company on the acquisition date.

            Back to top

            What is included

            'Management functions' are defined in the legislation as 'functions with respect to services, repairs, maintenance, improvements, insurance and management' - that is, the delivery of all the duties reserved to the landlord under the lease. Typically these will include:

            repairs, redecorations and maintenance of the structure of the build-ing and the common parts, including cyclical or seasonal maintenance and the maintenance of plant and facilities, lifts, central heating boilers etc;
            improvements to the building (where this is included in the lease);
            provision of services - the lighting of the common parts, heating, cleaning, grounds maintenance, caretaking and porterage, warden services in the retirement sector etc;
            arranging the insurance for the building;
            levying and collection of service charges, accounting and the provision of statutory and other information;
            compliance with all statutory requirements relating to the management and fabric of the building;
            the day-to-day management of the building.
            The transferred functions also include approvals and enforcement of the covenants under the lease and these are considered below.

            The right to receive the ground rents does not pass to the RTM company but remains with the landlord. The landlord might, however, employ the RTM company's managing agent to collect the ground rents for him.


            It was common for landlords to insist on insuring and this has been corrected a long time ago in fact there was a post on LLZ about it recently, although I am aware of a couple of instances where the RTM insures on the landlord's block policy by agreement, as well as some who have insisted that they continue to insure it after having been freed they find out how expensive insurance actually is.

            In fact the right to manage is so draconian that if the RTM fails the landlord is under no obligation to resume engagement functions and I am involved in one case that due to time limits and a landlord unwilling to address their mess, that the LVT had to be asked to appoint a manager.
            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
              I do not doubt that the RTM has an obligation to insure where that obligation is imposed by the lease on the landlord. However, in whose name the insurance should be taken out is an entirely separate question. The landlord is still the landlord and has an insurable interest.

              Comment


                #8
                HBB,

                The RTM should purchase a block of flats insurance policy which will include insured cover for all the items you mentioned and also add cover for " 20% -30% alternative accommodation" and get competitive quotations from 3 independent brokers or insurers. The insurance company will only allow the named policy holder to make any claims and so the policy holder is best under the RTM company name or jointly named with freeholder if insisted by the freeholder as owner of the block . If the freeholder has other blocks insured , then its unlikely to insist on being included as a joint policy holder as having to declaring past claims on other policies for other sites may not be welcomed.

                If the wording of the lease requires the leaseholders' interest in the building to be mentioned , then you can ask for the policy to include a clause stating " the interests of the leaseholders and their mortgage lenders are automatically noted".

                The RTM should issue a copy of the summary of insured cover including , policy holder name, policy no and insurance company details to all of the leaseholders and to freeholder.

                Comment


                  #9
                  Originally posted by Lawcruncher View Post
                  I do not doubt that the RTM has an obligation to insure where that obligation is imposed by the lease on the landlord. However, in whose name the insurance should be taken out is an entirely separate question. The landlord is still the landlord and has an insurable interest.
                  Well no, it isn't......

                  A lease says the landlord (identified as ABC Ltd earlier or in the particulars) shall insure the building. When RTM applies statute as posted overwrites that as
                  - landlord now reads as "the right to manage company", and
                  - ABC ltd now is read as "XYZ rtm co ltd.

                  It is accepted that the landlord insures is his own name and it is rarely specific as "insure in his own name" and then only when the lessee has responsibility to insure and must place the policy in both names.

                  As no one would question that it follows that as CLRA overwrites the landlords name or reference that that principle applies equally to the RTM. it doesn't really merit further discussion
                  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


                    #10
                    Assuming you are right, how is the RTM to protect the landlord's interest given that it owes the landlord an obligation to insure?

                    Comment


                      #11
                      Aah I see your misunderstanding, they don't. The RTM becomes the landlord they have no obligation to the landlord whatsoever ( save on re-entry and consents). As explained any reference in the lease is substituted by CLRA to read"the RTM".

                      The law is scruffy and gave under amendment in 2nd reading the right to join the company so that the landlord has the ability to call them to account as a member and take action against a company that fails to insure (adequately or at all). They can also seek an injunction in the County Court under s107 There has been very little litigation after RTM is gained as the general approach of landlords is to get their ground rents and if it burns down then he gets an empty site back The exception of course is the more complicated sites and in the cases where there is some overlap for retained premises or multi use sites, cooperation usually wins the day. S 97(3 ) in unhelpful, in that if he is dissatisfied, he can insure at his own cost as you say, which is rather galling when the RTM should insure (adequately) and it would be exceptional that any risk the freeholder has is not covered.
                      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
                        But section 97(1) says:

                        Any obligation owed by the RTM company by virtue of section 96 to a tenant under a lease of the whole or any part of the premises is also owed to each person who is landlord under the lease.

                        Comment


                          #13
                          I'm not sure whether my earlier reply to you all was sent as I can't see the post but I wanted to thank you all for helping me with this matter.

                          There is a problem with the amount to be insured and what must be insured as some of the members of the RTM wish to reduce premiums (which is understandable to a degree) and want to cut out certain aspects and not insure them e.g. remove common parts and equipment, in the cover and reduce public liability etc as well as remove legal expenses and removal of rubble should everything be burnt down/demolished. I don't want that as if anything happens aren't leaseholders/RTM responsible for costs?

                          This all seems complicated and I don't mind paying a bit extra for surety of cover but want to be able to say we have to do this to get a bit of cooperation. It seems dangerous not to get reasonable cover and our leases say that we have to cover rent for 2 years and it says the insurance has to be comprehensive.

                          Thanks for any of your further help in advance. Its greatly appreciated.

                          Comment


                            #14
                            Penny pinchers!

                            I do not know if any case has defined what comprehensive means. When it comes to risks it is used in contrast to "fire only" and whilst there may be some differences between companies, the risks covered by comprehensive policies tend to be very similar whoever the insurer is. Somewhat different is what you actually insure against, which is the question here. All the things that some tenants want taking out are surely included in any typical block policy as standard. If they are, then I think you are justified in including them. What you could do is get a quote for reduced coverage and see how much is saved. I doubt it will be significant.

                            Comment


                              #15
                              Originally posted by Lawcruncher View Post
                              But section 97(1) says:

                              Any obligation owed by the RTM company by virtue of section 96 to a tenant under a lease of the whole or any part of the premises is also owed to each person who is landlord under the lease.
                              I have only returned to this thread today and I don't see any need to carry on this academic debate with 10 years experience of RTM units and litigating them The answer is in the appalling structure behind the drafting of much of this Act.
                              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

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