Secret commissions

[Macromia]

1. Does the insurance have to be obtained on a like for like basis? As long as the new insurance meets the requirements within the leases, there is unlikely to be any reason why it has to be on exactly the same basis as insurance that has previously been arranged.
The important consideration is whether or not (a) the building is properly covered against all relevant risks, and (b) the lease has been properly complied with, not what has been done before. If changes that have been made mean that the cost of insurance has increased substantially, there could be an argument made regarding reasonableness, but in this case you would have to decide whether the changes add real value or not
2. More details would be required before any real comment can be made, but if the director is not acting in the best interest of all leaseholders (and deliberately misleading the blocks insurance company would be an example of that) it would seem like it may be worth trying to get the director replaced.
3. Perhaps this was a genuine mistake? If it has now been corrected, that would seem to be a reasonable explanation. It might be worth having a suitably qualified surveyor provide a proper estimate of rebuild costs, if this hasn't already been done.
4. If a leaseholder is running a business from the block this will need to be declared in case it invalidates the insurance. If running a business is allowed, one of the conditions for this should be that the leaseholder running the business pays any increase in the insurance (if applicable, and the leases allow for this).
D&O insurance is a reasonable expense, in my opinion, and one that should be allowed to be included in the service charges of any blocks that are managed by leaseholder run companies. You could argue that this should not be included in the service charges, but would you be prepared to act as a director yourself if you had to pay costs like this out of your own pocket in addition to giving up your time voluntarily? If so, and you feel that this director is not acting in the best interests of leaseholders, why not put yourself up for election to the role in his/her place? Of course, that would mean that you potentially ended up paying a significantly higher contribution to the D&O insurance (if you chose to keep yourself protected), as the cost would be shared between just the directors instead of all leaseholders.

[eagle2]

1 The questions for the leaseholder to consider are is the cover adequate and is the premium reasonable?

2 The leaseholder can make a claim and comments directly to the insurer.

3 If the error has not been corrected, the leaseholder can apply to the FTT to reduce his contribution towards the cost

4 The leaseholder can report the facts to the insurer. If D & O insurance is not permitted in the lease, the leaseholder can apply to the FTT.

The leaseholder should make the other leaseholders aware of the problems.

[leaseholder64]

I would forget the D&O issue.

In relation to RTMs, a recent Law Commission report ( https://s3-eu-west-2.amazonaws.com/l...WEB_240119.pdf ) notes that technical violations of this are common and proposes making company management costs recoverable from the service charge. They weren't considering RMCs, but the sensible thing would be to extend this to RMCs.

[AndrewDod]

You really need many more details here to enable meaningful comment....

a) You are suggesting a Director applied their own commission to an insurance policy
b) What sort of "business" - simply having a registered business address at the property is not "running a business" - neither is rteaching an occasional A level student Maths.
c) I disagree about the D&O insurance -- there may be a legal hole, but that does not mean D&O insurance is a valid service charge item - it is not. Are ground rents collected? What is this - a lessee owned company, RMC, what?
d) What false statement to insurers - if the insurance is invalid, then the insurance in total is not a valid service charge item (FTT case of ours)
e) What "attempted to block an insurance claim being made by a leaseholder trying to say it was their fault when it wasn't" - without knowing what you are talking about it is hard to comment

[leaseholder64]

I don't think it is common for leases to give an absolute right for leaseholders to claim on the insurance, and any claim will result in increased premiums or excesses, so refusing a claim might be a reasonable action.

[eagle2]

The lease would not give the right to claim on the insurance policy but the insurance contract will. The leaseholders have a recorded interest in the policy. Leaseholders are entitled to make a claim directly to whoever deals with the claims ie the insurer or the broker. A claim does not necessarily increase the premium or the excess, insurers build in a certain level of claims each year. The landlord or RMC in this case has the right to make comments but the leaseholder can ask the insurer to disregard them if they are invalid.

[leaseholder64]

If it were automatic that leaseholders had a recorded interest, there would not be a question, to that effect, on LPE1. A conveyancer would probably try to get an interest recorded if the got a response that this was not automatic. Ultimately, though, it is the buyer's choice as to whether not they pull out if their interest is not recorded.

A typical leaseholder claim would be for escape of water, and it may well bet hat those claims are frequent and pushing up premiums.

[AndrewDod]

The lease would not give the right to claim on the insurance policy but the insurance contract will. The leaseholders have a recorded interest in the policy. Leaseholders are entitled to make a claim directly to whoever deals with the claims ie the insurer or the broker. A claim does not necessarily increase the premium or the excess, insurers build in a certain level of claims each year. The landlord or RMC in this case has the right to make comments but the leaseholder can ask the insurer to disregard them if they are invalid.

The ability to claim something on an insurance contract has nothing at all to do with the right to claim something (which is determined by the lease). Insurance contracts to not necessarily limit themselves in this way.

For example if the policy is inappropriate and permits claiming of malicious damage by a tenant to the interior of flat, this does not mean a lessee can so claim. The lease will also specify what is within the remit of the lessor to insure. So if the insurance policy (ignoring the lease) allows a claim for damage to the decor of kitchen due to an exploding washing machine, the lessor cannot permit such a claim if neither the machine nor the decor is within the lessor's demise (cover for leaks between flats is complex however).

Insurance pretty much always increases due to a claim, and always makes it more difficult to find alternative insurance. If there are sufficient claims, it may be impossible to insure at all.

[eagle2]

Most buildings insurance policies state that the interests of leaseholders are automatically noted. If they don't, the leaseholder has the right to ask for his name to be specifically added to the policy. If there are a large number of leaseholders involved, the insurer will not take long to make it automatic.

[eagle2]

The ability to claim something on an insurance contract has nothing at all to do with the right to claim something (which is determined by the lease). Insurance contracts to not necessarily limit themselves in this way.

For example if the policy is inappropriate and permits claiming of malicious damage by a tenant to the interior of flat, this does not mean a lessee can so claim. The lease will also specify what is within the remit of the lessor to insure. So if the insurance policy (ignoring the lease) allows a claim for damage to the decor of kitchen due to an exploding washing machine, the lessor cannot permit such a claim if neither the machine nor the decor is within the lessor's demise (cover for leaks between flats is complex however).

Insurance pretty much always increases due to a claim, and always makes it more difficult to find alternative insurance. If there are sufficient claims, it may be impossible to insure at all.

I accept that claims under the lease may be different to claims under an insurance policy, I did not say otherwise.

I know from experience that a lessor cannot prevent a leaseholder from making a direct claim to the insurer. He can make comments to the insurer, no more.

I disagree regarding the premium nearly always increasing due to a claim. It depends on the number of claims and the amounts involved, If the lessor has a number of properties, the insurer will look at the portfolio rather than the individual property. The insurer allows a certain percentage of the premium to cover claims.

The insurer is aware that any increase in the premium could lead to the lessor reinsuring elsewhere.

[AndrewDod]

There is considerable doubt whether "portfolio" insurance is allowed by the lease and could easily be challenged. As a minimal example if a freeholder owned two independent blocks, and insured them jointly - if the roof blew off one block the lessees in the other block would quite reasonably challenge an increase to their premium, and they would undoubtedly be successful in that challenge.

Most insurers do not permit direct claims by individuals not named on the policy, nor should they permit claims by lessees. The FH can certainly block claims (for example a £150 claim on a policy with a £200 excess) - if the lessor is obliged to maintain an item by virtue of the lease, they can decide whether it is more cost effective to claim via insurance or otherwise. If your insurer is permitting lessees to place individual claims regardless of the lease or common sense, I suggest you find another insurer.

Apart from anything else, the lessor is responsible for the honesty and accuracy of information supplied to the insurer - and if false information is provided to an insurer, the lessor bears the risk (both in terms of an uninsured building where he is liable to insure the building, and in terms of a non-recoverable service charge expense -- which the lessor will have to cover out of his own pocket -- or declare insolvency if that is not possible.

[leaseholder64]

The alternative insurer will see the claims history and likely also put their premiums up.

[Stacker]

Macromia,

On reading through previous FTT cases yes obtaining the insurance on a like for like basis is required. As an example the previous insurance covered the permitted pets and now it does not. Another example the % paid out for alternative accommodation has been substantially reduced.

This was a water escape claim, the leaseholder contacted the insurance broker to let them know, the water damage was extensive. Without the leaseholder knowing the Director wrote to the insurance company and stated in writing that "the leaseholder was responsible because of a faulty washing machine not plumbed in properly", she put this in writing, the insurance loss adjustor of the company then contacted the leaseholder and started asking him lots of questions, he thought it was odd they were asking about the plumbing to a washing machine when the leak was due to something else as confirmed by a plumber.

Could be a genuine mistake however this same Director collaborated on a secret commission deal which came out of the woodwork many months later.This same director also did not tell the insurance company that a business where people are coming, staying and going from the property through the communal parts...was going on...did not declare this to the insurance company. No business allowed for in the lease.

Spoke with LEASE and D&O insurance can not be recovered from the lease or any company expenses. Also LEASE said that if a leaseholder paid towards this directors insurance they would be helping the directors to insure their losses against him if he won!

[Stacker]

eagle2,

There was a water escape claim and the excess has come down from £500.00 paid out for the water damage to £350.00. Its come down after the water escape claim!

The buildings insurance - commission was paid to broker for one month then the policy was transferred to another broker. The broker negotiated an insurance product with a non FSA regulated property manager, my view is this contract and secret commission should not have been put in place.

[eagle2]

AndrewDod,

A leaseholder is only able to challenge on the basis that he can obtain like for like insurance at a lower premium.

Insurers can and do accept claims directly from leaseholders The lessor is not entitled to block the claim, he can only advise the insurer if he considers it to be invalid but the ultimate decision lies with the insurer. A leaseholder is entitled to make a formal complaint directly with the insurer if a claim is not settled.

The lessor is not entitled to withhold information from the insurer by deciding not to make a claim.