Leasehold Insurance Issue

[nellied]

Hi, I wonder if anyone can assist please. We own a flat and it is the freeholders responsibility (Freehold Managers PLC) to insure. Up until now the cost for the share of the insurance has seemed reasonable and theres been no issue. However, out of the blue and part way through the insurance period, we received an invoice for an additional sum (that more than doubled the original annual figure). Following questioning they advised that a revaluation of the property had taken place and the sum insured was now almost 3 times the original amount. Can anyone advise 1) if this is acceptable practice and 2) whether there is anything in particular I should be asking for? I did receive a soft copy of the surveyor report but not a copy of the policy (even though I asked for it). I've so far withheld payment (only a month or so) but the demands and threats of admin charges have started and i would just like to understand my rights. Thanks

[NewSAHD]

a) First off, if you haven't done so already, make sure you advise FM - in writing - that it is not reasonable for them to attempt to add administrative charges to your account until such time as your own reasonable queries and requests for documentation remain unanswered.

 

b) Also, always remember that they can only recover costs and charges that are allowed under the terms of your lease - and leasehold legislation - so read through your lease as well.

 

c) Above all, get them to provide written confirmation to not adding charges for now, (email is fine at this stage), as otherwise, rest assured, those admininstrative charges will remain.

 

d) Keep it polite and friendly, for now, if only as YOU need THEM to (later) answer further queries for you, and no need, perhaps, to be too aggressive at this stage. Not suggesting you are being aggressive, of course!

 

e) The insurance revaluation is generally a 'good' thing. If a property's insurance/rebuilding sum is too low and there is a subsequent claim there is a risk that Insurers will apply an 'average clause', that is, they will only pay out a percentage of any claim - so, if the level of cover is 25% less than it should be then the Insurers may argue that they only pay out 75% of any claim .

 

f) That said, after you got written confirmation from them that they will not add adminstrative charges to your account THEN there are various questions you can ask them (if you don't know) including, but not limited to:

 

- when was the last revaluation undertaken and by whom

- was the sum insured index-linked and is it now

- is the Surveyor and their firm related in any way to FM and

- was there any commission, 'cross-selling', or other sum of money, fee or consideration exchanged between the Surveyor and FM other than the fee itsef for the revaluation - typing at speed here, but hope you can see what I'm driving at...

 

...for as much as a revaluation is, generally, a good thing, I have heard it said that it is simply an exerise to generate yet further fees for Surveyors and Freeholders alike and THAT is all before considering whether there are additional commissions built in PLUS all this before considering if the insurance premium itself is reasonable

 

Come bck to these points later, but hope that gives a flavour of what can occur

 

g) As for the insurance premium itself it does not have to be cheapest, but it does have to be reasonable. So, without advising as to why, insist on a copy of the Insurance Certificate (recall they are required to provide it anyway) and Policy Documentation too, although less necessary, for now

 

h) Once you have the certificate you can then get quotes from other Brokers (we can cover this later) to see if the level of premium is acceptable. Not the cheapest, as mentioned, but is it reasonable?

 

i) If the premium is NOT reasonable and your questions over fees/commissions raises other issues queries then you can make an application to the LVT (Leasehold Valuation Tribunal) over the reasonableness of costs, with a view to getting a determination in your favour, and getting the charges reduced. It is YOUR money that THEY are spending, after all

 

j) Please do not be put off by the length of the reply. BUT do DO your initial digging so you and your fellow leaseholders can better decide if any mileage in going down this route.

 

k) Incidentally, can you let me know how many leaseholders in your block and the approximate sums involved, so can see the scale of this... this information may be better in a PM to me, perhaps, so I undertake to only use what you send me to see if I can help in anyway. I will not forward your details on to any third party without your prior consent.

 

For whatever it is worth I do not work for FM and have no connection with them at all, save for having dealt with them off and on over the years.

 

All this typed at speed and may revisit/edit later, but hope this helps for now.

 

(Might be worth considering editing out the name of the Freeholder, as google seems to pick up everything! Arguments for and against this, so will leave that decision to you )

Edited July 22, 2010 by NewSAHD
removed full name of FM from my post :)

[NewSAHD]

Nearly forgot, sorry, useful link to follow at

 

Leasehold Advisory Service: Free advice on residential leasehold law

 

Post again or PM as you see fit - and best of luck too!

[andydd]

Excessive insurance by the landlord is a common problem and one that I have been dealing with to.

 

You may like to check out the Leasehold Advisory Site, Landlord Zone Forums and RPTS Site.

 

Excessive insurance can be challanged at a Leasehold Advisory Site (This is supposed to be a low cost informal 'court' to deal with these issues).

 

There have been many decsions taken on the subject of insurance and whether it is 'reasonable' or not, however many tenants are unsuccessful.

 

In my opinion there are some important steps if you wish to fight the cost. (at an LVT)

 

1) Obtain (as many as poss.) quotes for like-for-like landlord insurance for the building/block (this is NOT the samew as usual house insurance). But there are plenty of companies that will give you a quote.

 

2) Ask your landlord is there any kind of commission element he recives from the insurance company and/or broker (this may be confused further (as in my case), where the landlord takes a commission but claims it is for 'providing a claims handling service').

 

3) Ask your landlord for all the insurance details and also inquire how he tests the market each year, how many other insurance companies did he approach ?, did he obtain quotes ?, is the portfolio of buildings insured as a whole ?, could he break down this portfolio into smaller groups ?

 

You should try and read as many LVT decisions as you can, this will help you judge what details are needed for you to challange the landlords choice of insurer.

 

Let me know if you need any specific links to websites, etc

 

Andy

[NewSAHD]

Andy, hi, recall we swopped messages on this subject awhile back. I'm interested in your posts on this and should like to ask you some questions, if OK:

 

a) Firstly, your comment "where the landlord takes a commission but claims it is for 'providing a claims handling service'" interests me.

 

You're probably well aware that some landlord/agents often charge an additional fee (say, 10% fee on cost of works, call it Fee "CofW") in addition to their more usual general management fee (Fee "M") for dealing with insurance claims.

 

Depending on the scale of the claim and the level of their involvement - and that of third parties, such as Surveyors / Enginners and so on - I can see how this could be seen to be reasonable.

 

I would be interested to know, however, if your review of LVT determinations shows that certain 'types' of landlord/agent claim, when their insurance commissions have been challenged, that the inbuilt commission is for providing a 'claims handling service' (Fee "CHS") and, to get to the nub of it, whether a review of previous years Service Charge Accounts shows any indication that CofW-fees were ever charged i.e any liklihood of double counting of fees, above and beyond the M fee?

 

If the management contract is silent on the matter it might help further the argument, although most upto date management contracts I've seen tend to make it clear that Agenst will charge CofW fees now...

 

I mention this aside from the fact that the CHS argument may be a rather, er, specious argument, added to defences such as 'claims history' and others to which you have referred before ('portfolio' insurance and the like).

 

So, what did the Service Charge Accounts show in those LVT determinations that you were involved in / reviewed? i.e. when the various fees/costs in the accounts were analysed was their any possibility of double counting of fees?

 

b) From your review of the LVT determinations were you also able to build up a schedule of insurance rates / '£ per 100' etc?

 

Such rates would obviously would need to know the type/size/age of contruction, claims histories, and so on, but some of all this could be gleaned from the determinations themselves, as well as StreetView now too

 

==

 

I'd be interested to hear your thoughts on this, as the more these matters are questionned the more that all leaseholders should benefit.

 

To my mind the issue over inflated insurance premiums / commissions goes back many years and to all intents is paid for off the back of those homeowners (leaseholders) who are least able to afford it - and is still not fully resolved.

 

All this typed at speed, as usual , but hope that's all clear enough to follow.

 

As I say, I would welcome your thoughts on the matter!

 

 

(PS, nellied, btw, not meaning to hijack your post and hope the various comments assist)

Edited July 24, 2010 by NewSAHD

[andydd]

Hello again.

 

Lets put the CHS stuff on the back burner for a bit as I'm not sure how common this is (but it is relevant to my case).

 

By commission I mean a 'kick back' that is given from the insurance company or broker to the landlord, it isn't a management fee and I doubt very much whether any lease would allow it, it is simply the insurance company/broker saying 'continue insuring with us and we will make it worth your while, wink, wink, we will give 10-20% of the cost back to you', (note the 'back to you' bit, not back to the people who are actually paying, i.e the tenants !).

 

There have been many LVT decisions where at the very least this extra 10-20% has been ordered to be returned to the tenants, at least making the insurance a bit cheaper.

 

Clearly where there is some sort of commission there is an added bonus for the landlord to obtain insurance as high as possible, the higher the costs the more kick back he gets.

 

I'm not really sure where your mention of CofW is revelant here, I'm talking about purely the insurance costs, not any maintainence/building costs or management costs (they are seperate arguments).

 

As for rates per £1000, this often comes up (especially when my landlord is involved), unfortuantely the decisions made by the LVT are all over the place with no consistency so its very hard to judge (and also seems at odds with judging 'reasonableness' and the Forcelux v Sweetman decsion).

 

I shall now delve into my case a bit.

 

My landlord is Forcelux, there have been many LVT decisions regarding insurance involving them, some pre 2000, the tenants won, there was then a 'landmark' Lands Tribunal appeal in 2001, (the oft-quoted 'Forcelux v Sweetman'), this reversed a LVT decision and went into detail about what was meant by 'reasonableness', the outcome being that its not really the actual cost (or rate per £1000), but the actions of the landlord that matter, (i.e did he 'shop around' and test the market each year).

 

The cost of insurance for my building has risen ever higher, (and I notice for other homeowners with Forcelux as the freeholder) and I have for the last few years asked Forcelux to try and lower this cost somehow, but they have continued with the same insurer. The last response I had from them (their broker) said that they approached many insurers but none would quote hence they carried on using the same one, my arguement will be that the insurer is now in a monopoly position and the landlord should investigate other means of insuring, it is worth reading the attached Stapleton decsion and reading the LVT's comments, this case shows that there are other avenues that could be approached to gain cheaper insurance (i.e not insuring the whole block of many 100's/1000's of properties in one go).

 

Let me know if you want to discuss CHS further or want links/copies of LVT decisions (I've built up quite a library !, including my own case).

 

On a brighter note I recently took sperate action over overpaid ground rent, I was overjoyed with the result of this, I succesfully argued that Section 32 of the limitation Act applied and my landlord was ordered to back back amounts going back to 1996..with interest

 

Andy

Forcelux vs Stapleton.pdf

[NewSAHD]

andydd, hi, have sent you a PM and will come back to this thread later

[fredmac]

Hi, I am a Director of a management company in SE England and we are having a similar isssue with the same company with insurance costs almos tripling in 3 years and costs at least double quotes from other companies. We would be interested in comparing notes.

 

 

 

Hi, I wonder if anyone can assist please. We own a flat and it is the freeholders responsibility (Freehold Managers PLC) to insure. Up until now the cost for the share of the insurance has seemed reasonable and theres been no issue. However, out of the blue and part way through the insurance period, we received an invoice for an additional sum (that more than doubled the original annual figure). Following questioning they advised that a revaluation of the property had taken place and the sum insured was now almost 3 times the original amount. Can anyone advise 1) if this is acceptable practice and 2) whether there is anything in particular I should be asking for? I did receive a soft copy of the surveyor report but not a copy of the policy (even though I asked for it). I've so far withheld payment (only a month or so) but the demands and threats of admin charges have started and i would just like to understand my rights. Thanks

[NewSAHD]

Hi, apologies in advance for the length of my earlier post , but follow the various steps outlined in that, perhaps, and also in andydd's post too.

 

Then let us know where you are with it all, in terms of demands already made of you too, the number of leaseholder's in the block, and whether you have withheld payment.

 

A PM is fine, if you are nervous about communicating too much on an open forum.

 

Also, whatever you send to me by PM will not be sent on to anyone else without your prior approval and will only be used to help you.

 

I'm in two minds as to whether an open forum is the best place to discuss these matters anyway, although I fully appreciate 'google' may have brought you here, which is no bad thing. If wish to send me a PM though you are welcome to do so and I will come back by PM as soon as I can.

 

Answers to questions inevitably raise further questions, of course, but fill in what gaps for us all that you can and will see where we can comment.

 

PS

 

andydd, hi, I've not been around for a little while (family and work commitments), but as I can't find an 'embarrassed' emoticon at the moment, will write later with regards your earlier message, hope that's ok...

[fredmac]

Hi NewSAHD

 

Thank you for your swift response.

I would prefer to deal with this offline if possible but as a new user I cannot send PM's until I send 5 posts!?! Any suggestions other than sending you 3 more dummy posts?

 

Fredmac

 

Hi, apologies in advance for the length of my earlier post , but follow the various steps outlined in that, perhaps, and also in andydd's post too.

 

Then let us know where you are with it all, in terms of demands already made of you too, the number of leaseholder's in the block, and whether you have withheld payment.

 

A PM is fine, if you are nervous about communicating too much on an open forum.

 

Also, whatever you send to me by PM will not be sent on to anyone else without your prior approval and will only be used to help you.

 

I'm in two minds as to whether an open forum is the best place to discuss these matters anyway, although I fully appreciate 'google' may have brought you here, which is no bad thing. If wish to send me a PM though you are welcome to do so and I will come back by PM as soon as I can.

 

Answers to questions inevitably raise further questions, of course, but fill in what gaps for us all that you can and will see where we can comment.

 

PS

 

andydd, hi, I've not been around for a little while (family and work commitments), but as I can't find an 'embarrassed' emoticon at the moment, will write later with regards your earlier message, hope that's ok...

[NewSAHD]

Hi NewSAHD

 

Thank you for your swift response.

I would prefer to deal with this offline if possible but as a new user I cannot send PM's until I send 5 posts!?! Any suggestions other than sending you 3 more dummy posts?

 

Fredmac

 

You're more than welcome. PM on it's way to you...