Managing agent insuring for items not in lease

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    Managing agent insuring for items not in lease

    Hi everyone.

    I have recently received a copy of the insurance policy for a block of apartments from the MA.

    The policy lists the items to be covered as defiend in the lease (ie flood, terrorism, etc)

    However there are "extensions" on the policy including: Public Liability £5million for one event; Employers Liability £10million for any one event; Loss of metered water; Damage to landscaped gardens/gates; Local Authority Requirements; Alternative accomodation costs; Professional fees; Contents of common parts; Debris Removal.

    These items are not in the lease.

    The MA should not be charging this to the leaseholders am I correct?

    #2
    Hi there,

    You may be able to dispute your buildings' insurance under Section 19 of the Landlord and Tenant Act 1985 i.e. on grounds of reasonableness.

    Be aware, however, that leaseholders have been largely unsuccessful in arguing in the Leasehold Valuation Tribunal that a Buildings’ Insurance policy containing what are considered to be unnecessary policy clauses is unreasonable. This may be because specialist advice is not received. There has certainly been a certain reluctance by tenants to appeal to the Upper Tribunal given the absence of any noteworthy decision from there on this ground.

    I have produced an online Service Charge Dispute Analyser which deals with Buildings' Insurance, Administrative costs and Works. Further information can be accessed here: http://www.proleagle.com/servicecharges2.htm

    I hope this assists.
    CORINNE TUPLIN
    SOLICITOR
    PRO-LEAGLE
    www.proleagle.com

    ___________________
    Please note that any comments made are personal opinion and do not constitute legal advice.

    For Service Charge Disputes, you may wish to use Pro-Leagle's online Service Charge Dispute Analyser: http://www.proleagle.com/servicecharges.htm

    Comment


      #3
      These extensions are normally included in a standard insurance policy offered for "a block of flats". You really need most of the items e.g
      1. slate blown off the roof causing car crash and fatal accident means the flat owners become liable for damages to the victims.

      2. Serious fire damages building and total rebuild may take one or two years, during this time you need to be housed elsewhere which is paid by "alternative accommodation".

      3. Rebuilding requires removal of debris and fees for architect to oversee the planning consent and site restoration work etc.

      How much is the annual premium paid on your policy and what is the insured sum for the building ? What is the cost per flat ?

      Any clause included to say the "interests of the leaseholders and their mortgagors are automatically noted ?"

      Comment


        #4
        Current premium is unknown - the amount shown for "insurance" on the SC breakdown is nearly £18k which works out at over £300 for my flat (SCs are not split equally as some flats are bigger)

        The amount shown could be just the premium or the premium + the MA's commission for handling it.

        I have asked another insurer (one of the main ones) to provide a like for like quote based on the policy we currently have and they quote £12,000 a year including all the current extensions, a saving of £6k a year overall.

        Comment


          #5
          You are prob better off arguing (at an LVt if needed) that the insurance as a whole is excessive and then perhaps point out some of the 'extras' you dont think are needed,alternative accomidation and flood/terrorism cover are considered pretty standard these days even if the lease doesnt mention it, many leases were written long before terrorism and to a certain extent flooding became an issue.

          Andy
          Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

          I do not accept any liability to you in relation to the advice given.

          It is always recommended you seek further advice from a solicitor or legal expert.

          Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

          Comment


            #6
            Originally posted by andydd View Post
            You are prob better off arguing (at an LVt if needed) that the insurance as a whole is excessive and then perhaps point out some of the 'extras' you dont think are needed,alternative accomidation and flood/terrorism cover are considered pretty standard these days even if the lease doesnt mention it, many leases were written long before terrorism and to a certain extent flooding became an issue.

            Andy
            Im aware that many of the extensions are needed even though not in the lease and save us as leasholders from liabilities.

            It is clear however that the policy has not been put out for tender in a while and we have been quoted a significant reduction from another provider

            Comment


              #7
              The lack of decisions over the scope, as opposed to cost, of cover is largely due to "circumstances", rather than the strict interpretation of the lease.

              At its simplest most leaseholders benefit from cover on such items in the event of loss, requirements of either being a prudent leaseholder or to satisfy their mortgagee, even as a BTL landlord.

              While it might be relatively simple to win such an argument, the lessee might find themselves in need of additional cover, and often doing so at a far greater cost, and perhaps unable to do so.

              These circumstances would lend support to the inclusion of those perils, and their being recovered, under a Sweeper clause in a lease.

              If a leaseholder were to take a strict view of the insurance, then the other leaseholders and a landlord might well decide that a reduced policy or a shortfall in contributions is best solved by variation of the leases at the LVT, which in most cases would get majority support and a sympathetic ear at the LVT.

              The fact remains that insurers will not write a policy without certain cover "addons" especially PI and ELI, so there is no cost or recovery implication. On the basis of how buildings are valued for insurance purposes, much of the list you have are included, so the insurer will issue cover on an inclusive basis. http://hmlshaw.com/images/buildings-...ticle-0711.pdf

              It might refuse to offer cover if for example you exclude debris removal of the old building! In many cases the insurer cannot or will not reduce the premium but offer free of charge add- ons such as loss of rent to generate business.

              On the specifics Loss of metered water; Damage to landscaped gardens/gates; Local Authority Requirements; Alternative accomodation costs; Professional fees; Contents of common parts; Debris Removal, would it be desirable to lose these, the last five would be a significant service charge cost in the event of a fire or flood requiring extensive work?

              While you might win a challenge, the amount of change in the premium might be small, and more than likely amended as above, as the last five could be 20/25 % of the total cost of the loss.

              So imagine you win, the freeholder is looking at a potentially huge liability, they offer to to the residents, who either accept being lumbered with that, or pass. The landlord sells to another less risk averse investor or sells it to his new company with a total liability of £2!

              Finally you should examine the lease to see what arrangements are in place if there is a fire and the landlord is not obligated to re build, all you end up with is a cheque for a lot less than you owe and no home...

              That's why cover is rarely challenged.

              And that is specialist advice, for free......!
              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


                #8
                leaseholdanswers - thank you for your reply again You continue to impress.

                The main point I am getting at I suppose is when we asked another mainstream insurer to quote on the basis of a like-for-like quotation (including all the addons) we had a saving of £6000.

                Comment


                  #9
                  Originally posted by Milhouse View Post
                  leaseholdanswers - thank you for your reply again You continue to impress.

                  The main point I am getting at I suppose is when we asked another mainstream insurer to quote on the basis of a like-for-like quotation (including all the addons) we had a saving of £6000.
                  I am humbled!

                  The response was partly in response to post 2, bearing in mind the conclusions some might reach at the level of expertise when compared to the ( higher) level of understanding that Gordon and Andy have shown.

                  Yes by all means challenge away on the cost, google the insurer as to their claims record, and I hope my link in the post will help you understand how insurance sums are arrived at and why.
                  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
                    I musn't forget to thank everyone else for their replies also.

                    The reason I brought this up was as the RTM company we have begun to seek quotations for insurance once we take over. We have heard in the past that RTM companies have been able to create savings by "shopping around" more - and I asked all the current risks to be added to the quote for the new policy.

                    Comment


                      #11
                      Originally posted by Milhouse View Post
                      Im aware that many of the extensions are needed even though not in the lease and save us as leasholders from liabilities.

                      It is clear however that the policy has not been put out for tender in a while and we have been quoted a significant reduction from another provider
                      A Freeholder really is expected to 'shop around' each year for insurance.

                      There are many steps if you want challange insurance, the obvious ones being to get alternative quotes, trying very hard to make them like for like and also enquire as to what shopping around the FH does, you could also investiagte whether there is any commission or claims handling amounts.

                      Andy
                      Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

                      I do not accept any liability to you in relation to the advice given.

                      It is always recommended you seek further advice from a solicitor or legal expert.

                      Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

                      Comment


                        #12
                        Originally posted by leaseholdanswers View Post
                        The lack of decisions over the scope, as opposed to cost, of cover is largely due to "circumstances", rather than the strict interpretation of the lease.

                        At its simplest most leaseholders benefit from cover on such items in the event of loss, requirements of either being a prudent leaseholder or to satisfy their mortgagee, even as a BTL landlord.

                        That's why cover is rarely challenged.

                        And that is specialist advice, for free......!
                        There have been many cases relating to unnecessary policy clauses in the Leasehold Valuation Tribunal. Cover is also frequently challenged on the basis of unreasonably high cost. The point is, with one or two notable exceptions, they are not often successful as the issues appear to be argued by individuals with little familiarility of this specialist area of law.

                        Sadly, these individuals do not go on to appeal and this is the case with service charge determinations in general.
                        CORINNE TUPLIN
                        SOLICITOR
                        PRO-LEAGLE
                        www.proleagle.com

                        ___________________
                        Please note that any comments made are personal opinion and do not constitute legal advice.

                        For Service Charge Disputes, you may wish to use Pro-Leagle's online Service Charge Dispute Analyser: http://www.proleagle.com/servicecharges.htm

                        Comment


                          #13
                          If I accept your view that these cases are argued (inexpertly) by individuals, it might be because those that raise the issues are advised, as explained earlier, that a victory is often self defeating, and readily changed, or can have adverse results for the building, let alone face commercial difficulties in securing cover.

                          On the respondents side, as explained, often those additional clauses are offered as "extras" the removal of which has no effect on the premium, or are not offered without those elements. You might win a judgement of no financial purpose.

                          There are some matters which might be arguable, and if premium relevant, could be removed such as loss of metered water supply to no immediate detriment to any. Arguing removal or adjustment of the premium recovered for debris removal and professional fees is simply daft. It might lower the premium today but be varied later or set of a series of unwelcome events.

                          I don't disagree that there are grounds to argue, even appeal, and win, but we have to consider, in the claimants interest " At what great cost, victory?"
                          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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