Hi all,

Tried to send Andydd a PM regarding this one as I see he has a lot of expertise in this area but help from anyone would be greatly appreciated.

Long story short

- Regis/Pier management have taken over the freehold of our small block and buildings insurance subsequently more than doubled.

I have supplied their submission to the LVT below and would like to know of any key points or messages I should be supplying in my response in order to give myself the best chance of success.

My confidence has been knocked by the legal-ese within this letter and would really like some help!!

Hopefully someone out there can help stop another insurance rip-off, many thanks in advance,

Mwal

1. The Respondent has placed insurance in accordance with clause 5 to the registered lease dated 8th August 2002 via their brokers Oxygen Insurance Brokers Limited (Oxygen) with Brit Insurance Limited (Brit), a broker and insurer of repute.

2. Insurance was re-brokered in 2008 to Brit via Oxygen

3. The insurance premium is payable by the tenants to the landlord by way of Rent

4. The certificates and policy booklet (Exhibit PML 1) are very comprehensive and there is nothing further we are able to comment on. We are not specialised in insurance and rely on our broker who is FSA regulated to arrange insurance and negotiate terms.

5. Insurance is placed by the freeholder on a portfolio basis, not by individual property

6. The insurance is designed to be a comprehensive ‘all risks’ policy and the broker has recommended this type of insurance for the portfolio

7. Premiums are paid in ‘bulk’ by Regis to the broker (i.e. sums for all properties in any given renewal month are paid collectively, we therefore cannot provide a single receipt or invoice for each individual property, hence premiums are clearly specified on the policy certificates).

8. Oxygen has a binding authority agreement with Brit Insurance; Regis does not pay Brit directly.

9. We can confirm that the Landlord does not derive commission from this property in isolation. The Regis Group owns a large portfolio of over 18,000 units and it is the ability to ‘bulk buy’ that enables them to benefit from commissions on the portfolio as a whole.

10. The insurance is index linked and therefore the premium will increase by a small percentage on each renewal.

11. We wish to refer the Applicants and the Panel to the decision in Berrycroft Management Company Limited v. Sinclair Gardens Investments (Kensington) Limited (1996) EWHC Admin 50. The Court of Appeal held that despite the level of insurance premium, the cost was reasonably incurred in the normal course of business. It was considered acceptable for a large commercial landlord to place insurance on block policies with one single insurer.

12. Whilst this practice may not be the cheapest available, we submit that the position may be entirely different to other developments within the landlord’s portfolio.

13. We submit that it is not commercially viable, nor reasonable; to expect a commercial landlord to obtain insurance for each development separately, with different insurers, in order to benefit from the cheapest insurance available. This practice, if adopted, would incur significant cost and time to the landlord which would ultimately be charged via the service charge to the tenant.

14. A corporate landlord is unable to benefit from the same levels of flexibility that would be available to a private individual in the placing of insurance. This said, the block policies issued on such a large corporate scale allow a landlord to obtain favourable terms and benefits included in the policy that would not normally be available to a private individual. These terms in most cases will be more advantageous to a leaseholder in the event of a claim.

15. This position was upheld by the Northern Panel in the case of Perriman & Another v. Ground Rents (Regisport) Limited under reference MAN/00CZ/LSC/2008/0064. Whilst we appreciate this decision is not a binding precedent, we submit that it should be referred to by the tribunal and further would submit that the same is most persuasive in argument.

16. Forcelux Limited v. Sweetman and Another, (2001) 2 EGLR 173. It was confirmed and accepted the insurance premium should be in line with the market norm.

17. We submit that it would be reasonable and sensible to assess the market norm as being an average of all comparable quotes.

18. The Landlord is obligated to provide insurance that is reasonably incurred and reasonable in amount, there is no obligation it must be the cheapest available.

19. We refer to the Judgment of Evans LJ in the case of Havenridge Limited v. Boston Dyers Limited [1994] 49 EG 111, namely

“the fact that the Landlord might have obtained a lower premium elsewhere does not prevent him from recovering the premium which he has paid. Nor does it permit the tenant to defend the claim by showing what other insurers might have charged. Nor is it necessary for the Landlord to approach more than one insurer, or to ‘shop around’. If he approaches only one insurer, being one insurer ‘of repute’ , and a premium is negotiated and paid in the normal course of business as between them, reflecting the insurer’s usual rate for business of that kind then, in my judgment, the Landlord is entitled to succeed”

23. The burden of proof is on the Applicant to show that the premium is unreasonable.

Schilling & others v. Canary Riverside Development PTD Limited & others under references LRX/26/31/47/2005

Can anyone help with this?

A slight bump but also trying to increase my posts so I can PM, apologies!

Sorry..missed this originally. Not really sure, what you are asking in your post.

To be honest whether the insurance cost is deemed excessive or not often seem to come down to how the Tribunal are feeling on the day as decisions swing one way to the other, it might be interesting to read some of the recent decisions of the Eastern Area (my area), the main chairman Bruce Eddington appears to have suddenly had enough of high charges and has made it clear and reduceded them.

I cant remember all the exact cases, but you'll find them all here, there is, I recall one featuring Oxygen.

Have a look here > http://www.rpts.gov.uk/Indexes/CAM_LV_SVC.htm

HH..The link above should show Southend on Sea cases for 2011, but theyve changed it and its blank for 2011 at mo, but check back when it works !

Iv'e got a list of the relevant cases, ill try and dig it out.

Andy

Sorry Andy, my original post wasn't that clear - I just wanted some advice on how to reply given Pier's letter to the LVT.

Don't go to too much trouble as it was all put together and is now with the LVT for them to decide, will let you know how it goes.

Hopefully I get someone who's a fed up with this racket as much as me!

Thanks for replying,

Mwal

My advice is applicable only if the rented premises are entirely within England and Wales, and you were over 18 years of age when the tenancy was granted.

Read this 'sticky' thread - Service Charges dispute - Suggestions.

And read this thread - Service Charges dispute - Buildings Insurance.

IMHO you are wasting your money in trying to dispute Berrycroft Management Company Limited v Sinclair Gardens Investments (Kensington) Limited (1996) in the LVT.

That is a Court of Appeal decision, and thus the Tribunal is absolutely bound by it.

This type of insurance is a species of legalised theft, as you can be certain the landlord is pocketing up to 50% of the premium that you're being asked to pay, as a kick-back for placing the insurance with a particular insurer.

My advice is applicable only if the rented premises are entirely within England and Wales, and you were over 18 years of age when the tenancy was granted.

 

 

Read this 'sticky' thread - Service Charges dispute - Suggestions.

 

 

And read this thread - Service Charges dispute - Buildings Insurance.

 

 

IMHO you are wasting your money in trying to dispute Berrycroft Management Company Limited v Sinclair Gardens Investments (Kensington) Limited (1996) in the LVT.

 

That is a Court of Appeal decision, and thus the Tribunal is absolutely bound by it.

 

 

This type of insurance is a species of legalised theft, as you can be certain the landlord is pocketing up to 50% of the premium that you're being asked to pay, as a kick-back for placing the insurance with a particular insurer.

Whilst LVT's are or should be bound by certain higher court decisions, they still often reach different conclusions to that of the higher court(s), Forcelux v Sweetman is another ofte reffered to decision, which did appear to favour landlords but in the recent decisions I refered to above, the LVT has taken an almost contradictary view.

Ive found the list I had made, the decisions make very interesting reading...

£421 £202 19 Broomsleigh Street, LondonLON/00AG/LSC/2010/0461

£535 £256 19 Broomsleigh Street, LondonLON/00AG/LSC/2010/0461

£462 £221 19 Broomsleigh Street, LondonLON/00AG/LSC/2010/0461

£575 £350 67A St. Helens Road, WestcliffCAM/00KF/LSC/2010/0133

£437 £300 24B Cheltenham Road, SouthendCAM/00KF/LSC/2010/0111

£455 £300 24B Cheltenham Road, SouthendCAM/00KF/LSC/2010/0111

£478 £325 24B Cheltenham Road, SouthendCAM/00KF/LSC/2010/0111

£502 £325 24B Cheltenham Road, SouthendCAM/00KF/LSC/2010/0111

£465 £225 13A Illfracombe Road, SouthendCAM/00KF/LSC/2010/0127

£227 £227 7A Gainsborough Drive, WestcliffCAM/00KF/LSC/2010/0112

£230 £230 7A Gainsborough Drive, WestcliffCAM/00KF/LSC/2010/0112

£189 £189 7A Gainsborough Drive, WestcliffCAM/00KF/LSC/2010/0112

£480

In most of them the Tribunal (clearing sick of sky high insurance) reduced the amounts significantly and even 'overide' the views of Berrycroft and Sweetman.

Andy

Andy

May I just note in passing, for the benefit of those who are not familiar with the Leasehold Valuation Tribunal (LVT), that the decisions Andy has listed are principally decisions by the London [LON] and Cambridge [CAM] tribunals, and might not reflect the practice in other tribunals.

May I just note in passing, for the benefit of those who are not familiar with the Leasehold Valuation Tribunal (LVT), that the decisions Andy has listed are principally decisions by the London [LON] and Cambridge [CAM] tribunals, and might not reflect the practice in other tribunals.

True.. Unfortunately finding consitency amongst LVT decisions is rather rare, but I posted the above as they are relevant to me, CAM (Cambridge) is the Eastern Area LVT and covers me in Essex, and whilst in recent years they have tended to favour the landlord in insurance decisions, in very recent months they appear to have swung in favour of the tenant, maybe on a related point, in legal action I am involved in, my landlord had entered a counterclaim for service charge arrears, which I intended to defend on various points but one of them being the excessive insurance cost, now suddenly after informing my landlord of the above cases, he hasnt paid the required court fee and his counterclaim (and the resulting LVT application) have all been struck out. Maybe the recent local insurance decisions influenced him in this ?

The issue of inconsitencies in LVT decisions is rather worrying and while they do not have to follow similar/identical ? decisions, I am of the opinion to refer to the decisions in your statement of case.

Andy

The issue of inconsistency in the LVT is VERY worrying.

Even where there are binding House of Lords and Court of Appeal decisions, the LVT ignores them - knowing that there is s*d all the tenant can do about it, because in practice no unrepresented tenant is ever going to be capable of bringing an appeal. For unrepresented parties, the LVT is the one and only forum for these disputes.

The issue of inconsistency in the LVT is VERY worrying.

 

Even where there are binding House of Lords and Court of Appeal decisions, the LVT ignores them - knowing that there is s*d all the tenant can do about it, because in practice no unrepresented tenant is ever going to be capable of bringing an appeal. For unrepresented parties, the LVT is the one and only forum for these disputes.

Too true, I appealed my LVT decisions, initiallty to the LVt and then the lands Tribunal, I was unemployed at the time and therefore had a fee waiver, I doubt I would of appealed had i been working, especially now, where the initial appeal fee has gone upto £200.

Although I wasnt given permission to appeal, the LVT's (and LT's) comments on the points I raised were interesting and they appeared to backtrack slightly from some of the comments they made in their initial decision, especially with regards as to why they didnt follow earlier/similar LVT/LT decisions.

Andy

they appeared to backtrack slightly from some of the comments they made in their initial decision, especially with regards as to why they didnt follow earlier/similar LVT/LT decisions

Don't feel you have to keep us in suspense!

I'd be interested to hear what they actually said about that point.

Don't feel you have to keep us in suspense!

 

I'd be interested to hear what they actually said about that point.

Will do..ill dig out the docs and get my scanner fired up !

Hi

The successful challenges to the high charges claimed from the lessees for buildings insurance have been based on the fact that the landlord is not entitled to profit from the service charges.

When it has been established that the landlord either directly or indirectly receives payment from either the broker or the insurance co.then he has been asked to both identify the amount and to justify the payment by detailing what work he does for the money.

Westleigh Properties have been involved in a few cases and have refused to say how much or to say what they do for the money and consequently the charges to the lessees have been reduced by about 15% or so.

The broker for Westleigh is GHBC/Towergate who also operates for Glass .

One LVTcase involving Glass resulted in a reduction of charge to lessee even though the premium was less tha £200.

Forcelux have been challenged several times on the same topic and admitted to receiving 18.75% of the premium but justify the payment by saying that they process small claims.No lessee so far has successfully challenged that but there are several questions that need to asked .

Regius have fairly recently had a charge for ins. reduced because Piers declined to give information on questions of payments received so the LVT panel considered the charge to be high .

The attempts to challenge charges by submiiting alternate quotes has usually been futile as it is not possible to get like for like when one doesn't have the full details of the brokers original enquiry.

At a recent LVT hearing it was remarked that Westleigh had not offered a reduction to all lessees in a building where one lessee had acheived a reduction by a LVT decision. Gateway [ agent for Westleigh] stated that the reason is that they will put new arguments if the lessees wish to apply for a reduction.That should be interesting!

[When insurance payment is claimed as rent one needs to check whether that excludes that from being a service charge.]

Interesting points you make.............

.Are you like me in the South East/Essex area as many of the freeholders you mention are local to me,

I've a specific interest in Forcelux my freeholder,

and I'm well aware of their 18% commission although they claim this is for claims handling but I believe there are many arguments against this......................

..Interesting,

there have been many recent LVT decisions reagrding many of the freeholders you mention and the local Eastern area chairman (Bruce Eddington) appears to have grown sick of LVT cases regarding high insurance and has come down strongly in favour of then tenants,

and reducing the insurance by upto 50%,

leaving local 2 properties flats of approx £100,000 x 2 in value with insurnace quotes of approx. £350,

I am currently charged over £1300 by Forcelux !...........................................................

....Andy

Hi

Yes it is the Southend on sea area in which the LVT's have considered the activities to which I have referred.

It seems that Forcelux have appealed to the Upper[Lands] Tribunal on a number of cases in which the decision of the LVT has not gone their way so one must be prepared for such developments.

In April there occured a hearing where the lessee had obtained a quote for Buildings insurance from the same broker used by Forcelux [ smart move] which was substantialy lower than that charged by Forcelux. Bruce was the chair

I haven't seen the decision yet on the web but it could be interesting.

The argument against the Forcelux case of charging 18.75% is to ask the following:-

1] Is there any eevidence to show that an Insurance claim was progressed by Forcelux for this property?

2] Is there any evidence to show that Forcelux or Empire Finance [ their Man. Agent who are in fact Forcelux] have been requested to progress an Ins. claim for this property?

If the answer to these questions is negative then one should ask which part of the lease entitles Forcelux to a payment for work which they have not done or have not been asked to do.

Then draw attention to the provision in the RICS code of management under the insurance section 16.2 of the 2007 print. As you will know compliance with this code is obligatory .

draw attention to the provision in the RICS code of management under the insurance section 16.2 of the 2007 print. As you will know compliance with this code is obligatory .

In what sense do you mean 'obligatory'?

I have yet to encounter a case in which a lessee under a long lease was able to point to any covenant in the lease obliging the landlord or his agent to conform to the RICS code of management.

Also, most landlords, and many managing agents, are not members of RICS.

My opinion is that in most cases challenging the insurance rip-off in the Leasehold tribunal is a waste of time and money, which would be better spent lobbying your MP for a change in the law.

It seems that Forcelux have appealed to the Upper[Lands] Tribunal on a number of cases in which the decision of the LVT has not gone their way

They were in fact notorious some years ago for pursuing the case of Forcelux v Sweetman on appeal.

Forcelux v Sweetman [2001] 2 EGLR 173

Hi

Yes it is the Southend on sea area in which the LVT's have considered the activities to which I have referred.

It seems that Forcelux have appealed to the Upper[Lands] Tribunal on a number of cases in which the decision of the LVT has not gone their way so one must be prepared for suchdevelopments.

In April there occured a hearing where the lessee had obtained a quote for Buildings insurance from the same broker used by Forcelux [ smart move] which was substantialy lower than that charged by Forcelux. Bruce was the chair. I haven't seen the decision yet on the web but it could be interesting.

The argument against the Forcelux case of charging 18.75% is to ask the following:-

1] Is there any eevidence to show that an Insurance claim was progressed by Forcelux for this property?

2] Is there any evidence to show that Forcelux or Empire Finance [ their Man. Agent who are in fact Forcelux] have been requested to progress an Ins. claim for this p[roperty?

If the answer to these questions is negative then one should ask which part of the lease entitles Forcelux to a payment for work which they have not done or have not been asked to do.

Then draw attention to the provision in the RICS code of management under the insurance section 16.2 of the 2007 print. As you will know compliance with this code is obligatory .

I agree with Ed, in that compliance with RICS is not obligatory it is mandatory, ie. they DONT HAVE to comply BUT it certainly would be worth listing any non-compliance issues (especially as Forcelux often point out they charge for certain items in order to be RICS compliant).

In addition to your points above I would also ask how much money is raised by Forcelux (or the questionable EFS, see my LVT decision for what the LVT thought of them, http://www.rpts.gov.uk/Files/2010/April/00000ZSI.pdf), I believe it would be far more than the cost of employing someone full time to handle claims), and of course point to RICS dislike of percenatge based fees and point out the more Forcelux (or anyone) charges for insurance the more 'commision' they get, even if it is for claims handling as suggested by Forcelux.

I have somewhere a list of the 5 or 6 recent LVT decisions in which the LVT (Bruce) decided in the tenants favour which I sent to Forcelux, to which I had no reply, I also tried to discuss this at Southend County Court with the director of Forcelux but he was dismissive, the 'Sweetman' case reffered to by Ed is of course often quoted but it is now rather old and I'm sure an LVT could be (and indeed has) found in the tenants favour (not forgetting of course that Lands Tribunal decisions are not actually binding on LVT's).

If anyone here is having problems with Forcelux I strongly urge you to look at your lease regargding whtether or not service charges can be demanded in advance, also look closely at the summary of rights attached, you will find it is in fact invalid.

Hi

The Rics code is approved by the Secretary of State and to disregard it's content would be unwise.As Forcelux often attend LVT's with a MRICS they will be aware of the code.

Forcelux have previously said they have about 400 units in the Southend area. THeir property business spreads from the South coast up to Nottinghamshire but I see no figures for the total units.

Seems that individual ins. charge is about £500 so at 18.75% the income is substantial.

The LVT for Manor Road ,Southend ,[about 2 years ago] discussed Forcelux/Sweetman at some length and the lessee put forward good arguement but was not successful.

The use of LVT's for challenging ins premiums has had success in the past in connection with Westleigh Properties. Mainly these have been because the broker [GHBC/Towergate ] has offerred substantial reductions just before the hearing.Examples are 10St Anns Rd.,45 West Rd, Sandrock Rd[Lewisham] ,in which 50% reductions were offered. There may be others who withdrew the application for hearing after receiving the offer.

We seem to be very much on the same wavelength, I was due to have a county court case reffered to the LVT as part of a counterclaim against me, but Forcelux managed to mess this up with regards to payment of court fees and it was struck out as was there subsequent set aside application,

however I had by then began investigating insurance details, I was planning on getting some sort of disclosure of how many properties they do actually own (I am aware of the '400' figure), how much is the total insurance bill and from that work out how much the 18.7% actually raises, I suspect it is a very large figure.

Andy

In the case of Westleigh and their broker [GHBC/Towergate] the arrangement with AXA has been that the Ins.Co. establishes the overall premium but the distribution to the individual buildings is done by the broker

The 'certificate' is generated by the broker and often includes cover for 'emergency' which is rarely if ever a requirement of the lease.

The terrorist cover is often challenged at LVT's but is never successful as nobody is going to reduce coverage just in case!

Also worth noting that even if the lease allows charge for the ins in advance on account it is not uncommon for the insurance year tostart just before the financial year for the property.

This means that the landlord who operates a 6 month in advance routine [ which is common] gets the ins money [estimated] on average about 9 months in advance.

Regarding Forcelux they have an unusual element in their insurance in that the excess for subsidence is at £500 compared to the norm of £1000.

This makes it additionally difficult to get like for like offers.

Also Forcelux are likely to say that lessees are much apreciative of this arrangement BUT do not produce evidence to suuport such statement.

Always ask for evidence to support statements.

Seems to me that arrangement is pretty small beer if the excess is split between all lessees in the building .

Whilst the burden of legal proof lies with the applicant the burden of evidential proof starts with the applicant but goes back and forth between applicant and respondent; aand the decision is based on the evidence.

legrun

A couple of points, I (and others, see Stapleton v Forcelux) have argued that the (my) lease doesnt allow any advance payments, Forcelux have now conceded this and their latest demand is the first (in 16 years) to actually comply with this (although it still doesnt conform to the Summary of Rights and it also comes directly from Forcelux and not EFS), as for the subsidence clause,

I see no reason why alternative insurance quotes have to be identical to the landlords, surely they must meet the provisions of the lease and perhaps it is also now accepted that they include terrorism cover but apart from that they dont HAVE to be like for like, although if they are this makes the job of comparison easier for an LVT.

Andy

Hi

The question of payments in advance on account is straightforward and not really a matter of judgment.

Either the lease calls for it or not.I doubt that the landlord [or indeed many lessees] actually reads all the leases before establishing a procedure for issuing demands and just proceeds with a system which benefits him/her and maybe reacts when somebody objects.

There have been a number of instances when a managing agent has been criticised for trying to shoehorn an account into their system disregarding the lease.

Interesting to note that if a landlord then persists with any element of threat to demand monies to which he is clearly not entitled he is guilty of harrasment and this was drawn to the ttention of Mr Jakob at a LVT in April 2011[ not yet on the Web] by the chair[ Mr Sinclair] withreference to British Gas [ Google British Gas Harrassment ].

I notice that a number of Forcelux properties were revalued upwards for insurance purposes a couple of years ago { by Sorrel] and the cut to F stayed at 18.75%. the was therefor e an increase in their take but nobody has asked what extra work they have done to justify the increase in income!

I'm not saying what is right or wrong but draw attention to the facts.

legrun

Wow..reading your posts is like having an insight into my own views ! .

In my LVT case, I bought up the issue of advance payments at the tribunal agreed but then went on with some strange comments about Forcelux being able to charge interest (read 'Conclusions' part).

Yes, clearly they operate an advance/interim regime even if the leases do not allow this, they also add on admin and interest charges even if not allowed, I couldnt argue this point properally as the LVT disallowed me to question charges pre 2005, although I have recently had some success in the county court regarding other admin charges.

Im aware of the British gas case, someone mentioned it and the issue of harrassment recently on landlord Zone forum, where I and others did try to caution him against using that as a countercalim, but of course it would be worth mentioning at an LVT, I would certainly be very interested in the recent LVT case you mentioned, how did you know about it, did you attend some recent LVT cases ?

Incidently I am currently in the middle of legal action for a breach of covenant regarding a common area of land that has overgrown and dangerous that has become quite complex.

Andy

Hi

The LVT's are open to the public .

Much of what is said does not appear in the decision report as you know.

At the Manor Road hearing [stapleton v Forcelux] the panel suggested that F review their insurance charges in the light of the charges made by Glass for similar properties.I am not aware that anybody has asked F what the outcome of that consideration is!

At that hearing Mr Stapleton ,who is clearly a knowledgable and experienced person, argued on the basis of alternative quotes and suitable adjustments and allowances for differences with the F policy, but was met with the 'not like for like' argument .

The failure to cross examine Mr Jakob on his testamony to establish that the landlord profits from the service charge [eg the numbers given by F did not compute] or to follow the money[ ie does F invoice the broker for the 18.75% or does F withhold that amount from the payment, or indeed does that include VAT etc.]

or to challenge that the landlord is charging individual lessees for work which he hasnt done for their building, when there exists a procedure which would enable him to charge when and if he did the work , is I think why the panel decided in favour of Forcelux.

It was never established what was the limit cost which identified a 'small' claim.

legrun

Well..I certainly have been reminding Forcelux of the quotes in Stapleton, each year I have been reminding them and asking that they (as suggested), try and obtain more alternative quotes, but they have made no changes at all to anything and in fact the insurance amounts have increased,

they sent me a letter from their broker but all it said was that they approached 3 other insurance firms but they all 'no-quoted', this I believe puts Aviva in a monopoly position, and they can effectively charge what they want because no-one else will provide insurance.

Strangely enough my old flatmate's girlfriend was a relative of Mr Stapleton and works with him, so I was thinking of approaching him as a surveyor for help, firstly for a house valuation (as you pointed out, Forcelux did have the properties recently re-valued, but mine now seems far in excess for what its worth and the re-build value is huge) and secondly for views on the common area which has been neglected.

The fact that Forcelux have (only just) won on insurance issues is surprising in the light of Bruce eddington's recent decisions, they appear to be almost a 180 degree reversal.

Can I ask how you find out about forthcoming local LVT cases ?...and where you by chance at mine ?. I recall having a chat with someone after.

Andy