Recovering Insurance 'Commission'

[JK0]

******* Action blog has a report of an LVT judgement where the freeholder's insurance commission was found to be not chargeable.

www.residential-property.judiciary.gov.uk/Files/2012/May/CHI_21UG_LIS_2012_16_10_May_2012_15_38_50.htm

I have an investment flat in a block run by this company, albeit not a retirement flat, but a buy to let.

This raised a number of questions in my mind:

1.) How do I discover who insured/insures my block? The accounts don't mention who.

2.) Could /should individual lessees launch LVT cases, or should it be done collectively?

3.) If not done as part of a RTM, what chance is there of getting the money returned rather than swallowed up by future imaginary expenses?

[andydd]

Think I read that the other day, the issue of comissions has existed for a long time, but it appears that more recently that LVT's have started to take a firmer approach and conclude that insurance comissions be refunded whereas in the past they often did nothing unless the comission was very high.

My freeholder has used the argument that it wasnt a comission (of 18.75%) but a claims handling fee, however he camne rather unstuck here > http://www.lease-advice.org/decision...-6000/5894.pdf where the LVT pointed out as an un_FSA regulated company it was unlawful to offer such services.

You can simoply write to the FH/MA to request a summary of insurance, they commit an offence if they dont reply.

It may well be better if you make a joint application as clearly there is strength in numbers and you could share the cost of an application and a legal representation but its not vital.

As for money returned, there appears no hard and fast rules on this, I believe an LVT has no power to actual order a refund (but many still do), in my case the money was simply credited to my accountm, which Im not happy about, although in subsequent legal action I had more money actually refunded directly to me (although this was in County Court not LVT).

Andy

[JK0]

Thanks Andy.

Did the LVT order that your fellow lessees get their portions of the commission restored to their accounts or was it just you?

Really this should be put in the reserve fund shouldn't it? (If only your amount is credited, the place may end up scruffier than if everyone was credited.)

[andydd]

Hi.

Ive only visited the LVT once (but CC about 5 times on related matters), and this case didnt involve comission/claims handling matters sp Ive yet had to argue this point (my latest claim by my freeholder was struck out by county court at an early stage so didnt reach LVT).

I'd assume though if it was just me at an LVT then any refunds/credit would apply to just me, (I havnt spoken to the other leaseholder for a while but Im pretty certain that the FH didnt refund her any of the amounts that they refunded/credited me). I suppose a sensible FH (!) would refund all the leaseholders but I bet many don't !.

I suspect eventually I will have to argue the commission/claims handling (and generally excessive insurance) amounts at an LVT, but untill my Fh gets his act together and serves valid demands this isnt going to happen any time soon.

Andy

[leaseholdanswers]

You make a section 30 A request http://www.legislation.gov.uk/ukpga/1985/70/schedule

The LVT determines that £x is due. Depending on the lease and how and how charges are raised they should be adjusted.

In virtually all cases it will be a credit or adjustment rather than a payment as that as said depends on the leases.

Yes the more the merrier and the lower the application fee. It then becomes £'s each than £00's for you.

If you have sight of the MA's duties this will help in determining if they are being paid twice, once in commission share and once in fees.

I disagree with Andydd is so far as Panels are taking issues with how genuine the claims handling is and certain companies and organisations generate income out of this and offer little in the way of service, and are rather less concerned if a tangible and effective service is being provided.

THe latter of course rarely find themsleves at an LVT.

[JK0]

Thanks LHA.

Do they have to provide the information for previous years, and details of commission?

Presumably it's best if I ask MA for all the other lessees' details at the same time isn't it? Am I likely to be stung with admin charges for this?

[andydd]

The RICs code does require commissions to be revealed to LH's but I doubt many are. (2.6 Insurance commissions and all other sources of income to the managing agent arising out of the management should be declared to the client and to tenants.)

I only knew of the amounts my FH had in commission/claims handling as a result of reading about him in other LVT's (although there are plenty of cases where other FH's refuse to disclose this amount, even when asked by an LVT).

In my recent case, I requested this amount as per CPR 18 (Request for information) as it would of been relevant to the case, I made an informal request (following Practise Direction 18) and received no response* and was going to follow it up by asking the Court to 'force' them to comply, but as it was struck out I didnt pursue it.

* The solicitor did hand me some docs just before the hearing, but they were not what I had asked for and had no mention of insurance commisions/amounts.

I wouldnt expect to pay extra admin fees, I'd argue that it should be included within the management fee.

Andy

[JK0]

Thanks Andy.

[flatpackman]

We tried getting a quote for buildings insurance for our block as we are an RTM.

When we asked the broker how much commission they got many were quoting 15%+, On a premium of £2,000 thats £300 it would be fairer if they refunded the commission and levied a fee based on the amount of time spent searching the market. In some cases it would seem that very little effort was put in and business was placed with a favoured insurer

[leaseholdanswers]

We tried getting a quote for buildings insurance for our block as we are an RTM.

When we asked the broker how much commission they got many were quoting 15%+, On a premium of £2,000 that's £300 it would be fairer if they refunded the commission and levied a fee based on the amount of time spent searching the market. In some cases it would seem that very little effort was put in and business was placed with a favoured insurer

Ah but the premium is not £2000. Any insurer writes business with a profit element. They share that with the introducing party, and the over all premium and share depends on the amount of business they exchange.

They do not offer a net figure the premium is £2300, and the broker takes 15%, in the same way the same premium would be offered direct and they keep 15 % as their own profit.

IN simple terms it is way of having a wider reach by a self employed sales force.

That said there are firms who will sit down and offer agents and landlords to add significant commission over the premium. A very large agent or landlord has the ability to drive down premiums below an average but still have the client, and therefore payers, pay around that average and keep that "extra".

When you consider insurance there is very little effort or paperwork, it is simply taking on your risk.

A broker can of course agree to charge a fee and rebate the commission to you less those costs. They will charge for claims handling and of course it depends how much they will charge. Don't expect a simple rate per hour!