Freeholders building insurance question

[DNM2012]

Hi all

I guess this could be posted in the insurance forum but I think the question also relates to what is in the leases so plumped for here-

I will shortly own the freehold to my property and the upstairs LH flat. I need to arrange buildings insurance for the completion date.

I have been looking for quotes and some of the questions the insurers ask, I cannot answer factually.

eg: Are any tenants DSS? I can't be sure that any of the tenants of the other flat are DSS or not, and the landlady is unlikely to admit one way or the other who lives there as this will be admitting she is in breach of her lease (A separate issue). There is nothing in the lease requiring the FH be informed of any subletting.

I am assuming I am best to get cover that covers the property for the use it is currently put to, GF flat owner/occupied and the upstairs flat as a HMO, even though this is in breach of the lease terms.

Any advice gratefully received.

Thanks

[leaseholdanswers]

You can answer NO, there is no such thing as the DSS.

Should you be buying this if the upstairs flat is in breach of the lease, and if so on a contignecy basis or a vastly reduced price.

The problem that you are going to have is insuring without declaring the full circumstances, and risk the premium being challenged as unreasonble by viritue of the breach and its effect of cover and premium.

You should be talking about that with a suitable broker about cover that can be put ion place and later adjusted.

You should also be taking about these breaches with your solicitor who in turn needs to examine very clsely your ability to enforce the terms of the elase and with the current FH to examine what they have said and done to date.

[DNM2012]

You can answer NO, there is no such thing as the DSS.

Should you be buying this if the upstairs flat is in breach of the lease, and if so on a contignecy basis or a vastly reduced price.

The problem that you are going to have is insuring without declaring the full circumstances, and risk the premium being challenged as unreasonble by viritue of the breach and its effect of cover and premium.

You should be talking about that with a suitable broker about cover that can be put ion place and later adjusted.

You should also be taking about these breaches with your solicitor who in turn needs to examine very clsely your ability to enforce the terms of the elase and with the current FH to examine what they have said and done to date.

Thanks LHA

My solicitor is fully aware my main reason for buying the FH is so that I can enforce the terms of the lease.
We are due to exchange this week, If you are saying this may be a problem, can you expand on what I should be asking my solicitor?
You seem to be saying if I buy the FH I still may not be able to enforce the covenants.

[ram]

Insurance only reply.
The building should already be insured ! and strange that it expires exactly on your completion date.

You NEED to find out what previous claims have been made, which often can be unknown to you, as to falsely fill in an insurance application and not mentioning --such as ( Example only ) -- the £ 500,000 rebuild due to current leasholder who is known to start fires ! ! ! and continues to do so, then you could have a policy cancelled if and when they find out you have not included all previous claims--

etc

[DNM2012]

Insurance only reply.
The building should already be insured ! and strange that it expires exactly on your completion date.

On my solicitors advice, we used the expiry date of the current policy as the completion date, thus leaving the current FH responsible for insuring the property until the existing policy expires.
Good point about previous claims, hopefully that is answered in my solicitors enquiries.

[leaseholdanswers]

The problem is two fold

1 what has the former freeholder done and said that might have waived the breach ( its not clear from your post whether its a once and for all breach or a continuing one which unlawfull occupation can be) as thta wouldrpec;ude forfeiture as the remedy and outside FTT (LVT) detemination. This leaves you with in=junctions and relying on the court to award you all your costs as , because the Section 146 route cannot be taken, csots are rarely recoverable under the lease.

that the solicitor knows why you are buying does not mean that they have reviewed your position and ability to do so.

2 Can you actually get insurance, and if you are adding legal expenses cover, will this be excluded or cover refused or delayed. Have you had the building valued for insurance purposes ( no its not the sale price of both flats plus a bit)

3 While a seller can insure to completion the proeorpty is effectlvely yours at exchange and I would seek your solicitors assuranaces on your psotion.

[DNM2012]

The problem is two fold

1 what has the former freeholder done and said that might have waived the breach ( its not clear from your post whether its a once and for all breach or a continuing one which unlawfull occupation can be) as thta wouldrpec;ude forfeiture as the remedy and outside FTT (LVT) detemination. This leaves you with in=junctions and relying on the court to award you all your costs as , because the Section 146 route cannot be taken, csots are rarely recoverable under the lease.

that the solicitor knows why you are buying does not mean that they have reviewed your position and ability to do so.

2 Can you actually get insurance, and if you are adding legal expenses cover, will this be excluded or cover refused or delayed. Have you had the building valued for insurance purposes ( no its not the sale price of both flats plus a bit)

3 While a seller can insure to completion the proeorpty is effectlvely yours at exchange and I would seek your solicitors assuranaces on your psotion.

1) The breach is the continued letting of the property on a room by room basis, the lease restricts subletting part of the property and is restricted to single family use. The existing freeholder has inspected the property and wrote to the leaseholder but continues to tell me there is not enough evidence for him to take action. I have requested my solicitor investigates these points further.

2) The existing insurer confirmed the cover is valid despite the breach of lease so hopefully the answer to this point is yes. I have the reinstatement valuation from my original buyers survey, the current insurance rebuilding value and have used the rebuilding calculator (RBIS i Think) so have a good idea how much cover I need.

Thanks again LHA

[leaseholdanswers]

I would suggest that you ask the existing insurer to continue cover after completion, just to be sure! When it's resolved you can review.


The FH may have written and then demanded ground rent which was paid, then that could be waiver. There may be some scope for arguing a contiuing breach.
needs careful review.

[DNM2012]

I would suggest that you ask the existing insurer to continue cover after completion, just to be sure! When it's resolved you can review.

Yes was considering that, they are probably a long way of being the cheapest but seem to cover everything.

The FH may have written and then demanded ground rent which was paid, then that could be waiver. There may be some scope for arguing a contiuing breach.
needs careful review.

Ground rent outstanding for last year, so FH has not accepted rent since made aware of breach, but insurance has apparently been paid.

I really hope the current FH hasn't cocked this up for me, but even if so I have got to be in a better position owning the FH than not.

[leaseholdanswers]

The cheapest often dont have teh full claims history. It could even be heavily loaded with commission- recently dealt with a landlord on 55% commission with a broker

No you might not as if they have waived the breach what do you have to enforce the lease- thats why you need to put the LL in thumbscrews or adjust the price to offset the hideous cost of an injunction.

[DNM2012]

Unfortunately the thumbscrews probably wouldn't work, the main value of the FH lies in the other leases extension premium. So is worth more to the other LH than me in that respect, and the FH could sell to them if he chose to. I have a reasonable price on the FH which is around 20% below the valuation.

Which ever way this goes, the dice are rolled, I am far better informed as to the possible pitfalls and problems ahead thanks to this site.

We'll see where it goes, will keep you posted.

[leaseholdanswers]

Good the reason for my caution was to ensure that you and your solicitor were fully aware of thr risks. In part becasue I am mid way through a case where the flat owing freeholders are in a complete muddle, and staring at an internal bunfight, as a result of poor advice from a solicitor who is maintaining " we was only told to do the conveyancing, gov".

[DNM2012]

Well I have managed to get insurance cover in place, through a specialist broker.
To cover the multiple occupancy issue has added £100 to the cost of cover. Existing policy around £430.
Does £530 for £310k cover, all risks, 1920 brick built, slate roof, terrace conversion in London, 2 flat property, 1 owner occupied, 1 a 5 person HMO sound reasonable?.

[andydd]

Well its a lot less than my FH charges me ! (For a similar property but not in London)

[DNM2012]

andydd,

Thanks for that, I feel better now, I just assumed that the FH was getting a fat kickback and the £430 for last year was high in the first place.