Freeholder refusing to renewal Buildings Insurance

[Nimroddx]

Hello All,

Just a general question, not sure if anyone knows the answer. Our freeholder has had a bit of a mental break, either that or he is plain dumb. But he has sent a letter round to us all saying the Building Insurance due for renewal at the end of January will not be renewed as ONE of the 12 leaseholders hasn't paid up the recent service charge issued last month.

I've checked the lease, and it very specifically says the freeholder:

Section 4.3. To insure and keep insured the Building and any building erected in connection with them during the term hereby granted against loss or damage by fire, lightening, explosion, earthquake, flood, riot, civil commotion, malicious persons, subsidence and/or heave or landslip and aircraft and such other usual risks in respect of the building with a reputable insurer is willing to insure against.

Now I know I likely need to go to court / get solicitors involved to compel him to.

In the mean time, what happens when the Buildings Insurance runs out? The Freeholder has a personal worth over £1.4 million. So I'm hoping that he is legally liable for the building if it falls down? Ie : The Insurance is to cover him from being out of pocket, so if he's going to be an idiot and refuse to insure it, it's himself at risk.

I'd like to get my own insurance, but no insurance company will ensure a single flat as part of the overall building so I'm stuck.

Thoughts people?

Much appreicated.

[AndrewDod]

A few (unhelpful) comments:

Having a paid-for insurance policy does not mean one is insured. A director of our property got insurance, but lied to the insurer about the previous claims history. Lessees often assume that the insurance is in fact valid without knowing what passed between FH and insurer.

The legal framework makes it pretty damn hard to deal with rogue freeholders. In fact it protects them.

At the very least you need to write formally laying out the responsibility and his theoretical liability.

[ram]

By Law, the freeholder has to insure the building ( Your lease is a legal document ).

In your letter you state that by law he has to insure, and if one leaseholder has not paid, then the freeholder takes the leaseholder to court for none payment, but the freeholder MUST insure the building, then get the money back - That's how it works.

If freeholder does not insure the building and it burns down, all the leaseholders will sue his ass off, as they will have lost their 12 flats, including yours, and you wont get the building rebuilt, you wont have anywhere to live, you wont be put up in temp accommodation till the place is rebuilt, as it's not insured, you will have to continue to pay your mortgage for a flat you no longer have, and as the mortgage was lent against an asset ( your flat ) and that asset no longer exists for mortgage lender to forfeit your flat for none payment of loan, they will then insidt that all of you must pay back imediately, the loan.

Therefore it's no laughing matter, the freeholder must be made to see he must insure the building, or he personaly will be sued for £ 1.4 million, which means he will loose ALL his property he owns, all his bank ballance, his cars, boats, tv's etc.

You are in a serious possition, and if there is another cold spell lake a few years ago and the common water pipes burst in all wall cavities and leading up to the other flats, ( the freeholders pipes ) you will receive NO compensation, and all will have massive bills to pay out , and also sue the leaseholder, who will again, be made to pay, and if if cant pay, again he will be homeless.

Have I made the seriousness of this matter plain ?

You tell him to insure or he will be sued ( after telling him all the above ) or writing to him ( copy and paste.)

[Lawcruncher]

It is not quite the law that a freeholder must insure, but he certainly must insure if the obligation is imposed on him by the lease.

An obligation can either be conditional or unconditional. Restricting ourselves to insurance, a lease where the landlord is to insure can have one of the following covenants by the landlord:

(a) An unqualfied covenant to insure. The landlord must insure even if no tenant pays his share of the premium.

(b) A covenant to insure if the tenant pays his share of the premium. This is sometimes seen, but is not in fact a lot of use to a landlord. As long as one tenant pays he has to insure because that tenant can enforce the obligation.

(c) A covenant to insure if all the tenants pay their share of the premium. It is only if the covenant is in this form that the landlord can decline to insure if any tenant fails to pay his share of the premium. I never saw such a covenant and it would of course be unacceptable to a tenant.

Unless the landlord's insuring covenant follows form (c) tell him he must insure and that if he fails to insure he will personally be liable to make good any damage caused by an insured risk.

[AndrewDod]

Unless the landlord's insuring covenant follows form (c) tell him he must insure and that if he fails to insure he will personally be liable to make good any damage caused by an insured risk.

a) What if it is (as is commonly the case) a share-of-freehold situation controlled by a Company Director holding a majority share. The Company fails to insure. Is the Director personally liable, otherwise the affected lessees are simply dangling in the wind with no protection all.

b) I think what is more common than not insuring is FH obtaining insurance that is not effective (for example FH might provide false information or lie deliberately to the insurer in order to get a lower premium). This would usually be in the scenario in (a) above. There is insurance per the lease, but this insurance will not pay out.

[andybenw]

a) What if it is (as is commonly the case) a share-of-freehold situation controlled by a Company Director holding a majority share. The Company fails to insure. Is the Director personally liable, otherwise the affected lessees are simply dangling in the wind with no protection all.

I am doubtful that a) is common.

[AndrewDod]

I am doubtful that a) is common.

It is the case in two properties I own.

[bethy]

a) What if it is (as is commonly the case) a share-of-freehold situation controlled by a Company Director holding a majority share. The Company fails to insure. Is the Director personally liable, otherwise the affected lessees are simply dangling in the wind with no protection all.

b) I think what is more common than not insuring is FH obtaining insurance that is not effective (for example FH might provide false information or lie deliberately to the insurer in order to get a lower premium). This would usually be in the scenario in (a) above. There is insurance per the lease, but this insurance will not pay out.

Resurrecting an old thread...

We have recently had it confirmed that we are in situation b) above - we've paid for insurance that is not actually valid and won't pay out in there is a claim. The FH gave me (as secretary of new RTA) authority to speak direct to insurance agent, and we've realised so much has been set up wrong that the cover is invalid. I'm currently waiting to see how it can be put right and if the current insurer will still offer cover knowing what they now do.

My question is, leaseholders paid for a year's worth of cover from May 2020. It looks like 11 months of that has been worthless. Are we within our rights to request that a sizeable proportion of the the premium we've paid be offset against next year's? It's entirely the FH's errors that have caused this, and we've been entirely exposed for nearly a whole year with insurance that's not valid.

[ram]

If you had the "right" insurance, you would have already paid for 11 months insurance with no claims.
As is is, you have paid 11 months for Not the right insurance, with no claims, I assume
Are you out of pocket -- No
Was claim refused in those 11 months -- probably not.

I don't hold out much hope of getting back your last 11 / 12 months insurance fee, as there has been no loss, as outlined above.
( courts like to aportion Loss to a monetary loss, and there has been no loss ) - seeing as you have to pay every year, and this last year is probably cheaper than the new quote you will get.
As a compromise, I would ask the freeholder for this first new quote, to pay the increase in cost over the previous one, for one year only.

[Gordon999]

I suggest that your freeholder changes to insuring under a "block of flats building insurance policy" or

you setup RTM company for your block of flats and the RTM company appoints another managing agent which operates to RICS Residential Management Code.

[bethy]

I suggest that your freeholder changes to insuring under a "block of flats building insurance policy" or

you setup RTM company for your block of flats and the RTM company appoints another managing agent which operates to RICS Residential Management Code.

Thanks. Unfortunately there's a restaurant in the building so we don't meet the criteria for RTM. However, we have recently heard there is a managing agent being appointed - I've had an initial conversation with the company and they seem ok. So fingers crossed we might get things a bit more.sorted moving forward.