Episode 8: insurance for leasehold flats

Episode 8: insurance for leasehold flats

00:00 / 11:44

Following the Upper Tribunal’s recent decision in Brickfield Properties, we look at the requirements in some leases to place insurance in joint names.

Joining Cassandra on this expert podcast is Paul Robertson, Director of 1st Sure Flats and author of Robertson’s Principles of Insurance for Leasehold Flats.

Together, Cassandra and Paul look back at the previous Upper Tribunal decision in Green v 180 Archway Road, and discuss the impact of the Tribunal’s recent decision.

A must listen for any block manager or landlord placing insurance for blocks of flats.

2 Responses to “Episode 8: insurance for leasehold flats”
  1. An interesting case and yet another example of why you should RTBL … Read The Bl***y Lease!

    There is a practical issue here too, which should interest/concern property managers. If the lease says the insurance should be in joint names – for example in the name of the Freeholder and the Residents Management Company – then the insurance company can take instructions from … and pay claims to … either insured party. The agent acting for the RMC can therefore manage a claim directly and get the claim cheque paid to the RMC. If the policy is only in the name of the Freeholder, the insurance company will only pay the Freeholder – and then the agent has the task of getting the funds from the Freeholder, which is not always easy and will delay cash arriving in any event.

    A related problem I see often – is where the lease says the RMC “will place insurance via an agency of the Freeholder’s choice”. No practical problem there – but what normally happens is the Freeholder arranges the insurance via their friendly commission giving broker and the managing agent gets an invoice and the policy documents after the event. That is a) not complying with the terms of the lease, and b) removing the professional input by the RMC’s managing agent in deciding the terms of the cover; e.g. insured value.

    A question for you Cass > if the managing agent goes along with the above arrangement and allows the Freeholder to place the insurance – are they potentially negligent?

  2. Bernie raises two interesting points here. On the first point he is totally correct that if the policy is in the joint names of the freeholder and the residents management company (RMC) then the RMC has full rights under the policy which would include the ability to lodge a claim directly with the insurer. Naturally this could also be done by the RMC’s managing agent subject to that managing agent having appropriate mandates from the RMC and also an appropriate regulation route for the distribution of insurance such as direct regulation with the FCA or the RICS designated professional body. However as is always the case with leasehold matters the devil is in the detail of reading the lease which will probably define the party responsible for reinstatement and any insurance monies need to follow that requirement.

    On Bernie’s second point the type of lease I most commonly see requires the insurance policy to be placed by an insurance agent and/or insurer nominated by the freeholder. If the insurance obligation is upon the RMC to insurer in joint names via the agency of the freeholder then it is likely that when the lease was written this dates back to a time prior to 2005 when it was common for freeholders to hold insurance agencies themselves. This practise largely ceased with the introduction of compulsory regulation for the mediation of insurance by the Financial Services Authority from the 14th January 2005. There are many nuances to be considered however. If the lease specifically requires the RMC to arrange the insurance via an agency nominated by the freeholder then you would expect this transaction to be between the freeholder/s brokers and the agent acting for the RMC (subject to appropriate mandate and regulation) and that the freeholder would remain at arm’s length. However, the freeholder is also the joint insured so it could also be argued that they have rights on the policy and can intervene on the placing of insurance. Ultimately however the usual tests would apply in respect of reasonableness and scope of cover but possibly most interestingly as the RMC is a joint insured with full rights under the policy this will include commission disclosure (as required under FCA Rules) directly from the nominated insurance broker.

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