Very expensive multi-block insurance policy forced on Leaseholders

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    Very expensive multi-block insurance policy forced on Leaseholders

    Dear all, could you please share your thoughts on the following situation?

    I am one of the Directors of a RMC living in and managing a small block of flats (9 flats only). We have a three party Lease (Freeholder, RMC and Leaseholders). We employ a managing agent and company secretary to deal with service charge collection, accountancy, filing documents at Companies House, etc.

    We have been recently notified about a 10% increase in our building insurance premium which we feel is not justified based on our squeaky clean no-claim history, and our building being low-risk (live in Directors carrying out the regular H&S assessments and building maintenance, no cladding, no lift, no flat roof, recent major renovation, building is only 34 years old).

    Our Freeholder has a large property portfolio and she has a multi block policy. I shopped around a bit to see what would be the current market rate and was shocked to find out that our current building insurance is more than twice as much as the quotes I received.

    I have checked the relevant parts in our Lease and it does not state that our building must be insured under a multi block policy so I thought we could have a standalone (like for like) policy to ensure "reasonabless".

    I contacted the Landlord's brokers asking to review the renewal and match the quotes I presented. They refused to do so saying that our property is not a single standalone property but part of a large portfolio therefore the insurance is required to be arranged on this basis: the Freeholder's policy is a "bespoke one" covering the landlord as a large portfolio property owner and that there are terms and conditions that apply to individual standalone quotes which could not be reasonably apply to a large property owner and failure to comply with the conditions would invalidate the insurance.

    They also drew my attention to the fact that "regrettably", under the terms of Lease, I am not able to arrange my own separate insurance which I already knew but I thought, based on the Landlord and Tenant Act 1985, I could persuade the Freeholder to change insurance companies to get a cheaper but identical policy.

    Was I being naive? Are my hands tied based on the above? The renewal would be £4865, the like for like quotes I collected came in between £2000 and £2800.

    Any thoughts would be much appreciated


    A premium under a multi block policy should always cost less than a stand alone policy. I assume that you have obtained written quotes from reputable insurers and matched all the excesses and all the items of cover.

    I suggest that you ask the freeholder to disclose the amount of commission and any other benefits which it receives under the policy.

    The amount which you are required to pay must be reasonable and on the face of it, £4,865 is unreasonable, I would be tempted to offer to pay £2,000 and see what happens. The freeholder is unlikely to risk going to the FTT.

    Moving forward, you may wish to consider a RTM Company to take over the management duties of the freeholder and then you could arrange the insurance yourselves.


      How sure are you that you are comparing like for like? For instance, and it might seem unlikely, but very very few insurers include NBC losees under a comprehensive policy. NBC stands for Nuclear Biological and Chemical. I happen to know Zurich do and their policies are dearer than some of their competitors but the scope of cover and amounts of cover in certain types of losses are higher. The very large block policies such as your freeholder carries are likely to include refinements not found on a stand alone policy. I appreciate your displeasure but the Freeholder is not obliged to buy the cheapest policy and as you say the cover includes non invalidation clauses which are less frequently found on a standalone policy. When the chips are down and a major loss occurs a full cost insurer is likely to be more forthcoming than a discounter / A big claim can easily be fifty years worth of premium. I am dealing with one massive one now due to flooding in July, currently reserved at sixty times the annual premium. It is true that to some extent you get what you pay for with insurance.


        1. You should obtain a summary of the insured cover under the current policy ( by written request ) for your building's postcode address and receive this information within 30 days. ( re-instatement value for building , insured value , public liability and employee liability etc ) ,

        2. Get alternative quotes for the same insured cover from alternative brokers and

        3. Make a complaint to the FTT with alternative quotes, for judging the reasonableness of the insurance policy .


          I agree that the test of an insurance policy is when a claim is made but it does not follow that the more expensive the premium, the more likely the insurer will accept a claim.

          I also agree that the freeholder is not required to accept the lowest premium, however there is a large difference between £2,000 and £4,865 which requires some explanation.

          You definitely need more information from the freeholder, I would add a receipt for the premium issued by the insurer to the above list,

          I would not make any application to the FTT, you are not ready and it is better to let the freeholder make the application so that it has the burden of proof.


            Thank you all for your replies, I found them very helpful


              Just re-reading the above replies, eagle2 kindly advises to set up an RTM in order to arrange our own building insurance. I thought we would not need that as we have an RMC in place already but it seems there is a slight difference between the two: only RTMs are in full control of management. Is that correct?


                With a RTM Company, you would takeover the management duties of the freeholder, such as arranging the insurance and accepting notices etc. The freeholder would only collect the ground rent.

                You would then be able to approach your own insurance broker, choose which policy to accept and avoid paying commission to the freeholder.


                  Many thanks for the explanation


                    You can study or download the free guide to setting up RTM :



                      Originally posted by eagle2 View Post
                      With a RTM Company, you would takeover the management duties of the freeholder, such as arranging the insurance and accepting notices etc. The freeholder would only collect the ground rent.
                      How can this be right? The Notices of assignment must surely be served on the freeholder, otherwise how is he to know to whom to send the s166 notice for payment of the ground rent ?


                        Originally posted by L4NDLORD View Post

                        How can this be right? The Notices of assignment must surely be served on the freeholder, otherwise how is he to know to whom to send the s166 notice for payment of the ground rent ?
                        The receiving of the notices in respect of the assignment of a lease is not a service charge function and should, as you say, go to the freeholder.

                        If the RTM were to receipt a notice it could have an impact on the landlords' ability to action a breach of the lease and outstanding ground rent.

                        A lessee taking an assignment of the lease should serve notice on the landlord with the fee and also send a copy to the RTM company - there would be no requirement to send a fee with the notice to the RTM


                          The LEASE website states:

                          "Most leases contain provisions requiring the consent of the landlord to certain actions by the leaseholder; these can include sub-letting, assigning the lease and making alterations to the flat. The power to issue such approvals passes to the RTM company, although the company must keep the landlord informed. Before granting any such approval, the RTM company must give notice to the landlord"


                            I wouldn't put too much faith in the Lease website. Any competent solicitor will be sending LPE1 to the freeholder. Otherwise how would they know if ground rent was up to date ?


                              A solicitor would need to contact both the freeholder and the RTM Company in order to obtain the relevant information.


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