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Service Charges dispute - Buildings Insurance


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This post outlines some possible defences to a landlord's claim for service charge, where the item in dispute is the buildings insurance premium.

 

These are the arguments to put to the Court (or tribunal). It is up to it to decide, in the individual circumstances of each case, whether these points will succeed. Often it will depend on the precise wording used in the lease as to whether a particular point succeeds or fails.

 

These are only some suggestions, derived from practical experience of an actual claim heard by the tribunal. They are NOT the only defences possible. Other defences are available, based on the wording of your lease and the individual circumstances of your case.

 

This thread is a continuation of one of the points developed in my original post at http://www.consumeractiongroup.co.uk/forum/landlords-tenants/113080-service-charges-dispute-suggestions.html#post1112848

 

Read my posts in that other thread for further information about defending a service charge claim made against you.

 

 

Buildings Insurance

 

The following matters arise under the landlord’s covenant to insure the building, contained in clause __ in the lease :

 

(1) The landlord is in breach of his own covenants in the lease, and is not entitled to enforce the tenant covenants while his breach continues. In the alternative, it is not reasonable for him to recover the insurance premiums.

 

The landlord covenanted to insure the building and to produce to the tenant on request the policy of insurance and the receipt for the current year’s premium. I made such a request in the current year [and in previous years], but [in each case] the landlord failed to comply with his covenant.

 

(2) Alternatively, I made a written request to the managing agents requiring the landlord to supply a written summary of the insurance under section 30A of the Landlord and Tenant Act 1985, with which he has not complied.

 

 

A. As to the Landlord’s breach of covenant -

 

The facts are as follows :

 

The Applicant is himself in breach of covenant, in respect of his covenant to insure.

 

The landlord’s insurance covenant in clause ___ of the lease requires the landlord to produce the buildings insurance policy and the receipt for the current year’s premium payment to the tenant on request.

 

I made such a request on (date) [and in the previous __ years, by letters dated (date) and (date)] but the landlord did not comply with that covenant. His managing agents sent me only the policy schedule; [in each case] the landlord failed to produce the policy and failed to produce the premium receipt.

 

 

My reasons for disputing the Service Charge accounts in this respect are :

 

In clause ___ in the lease the landlord covenanted to insure the building, and to produce to the tenant on request the policy of insurance and the receipt for the current year’s premium. That clause says : "(Set out here the exact wording of the clause)"

 

As detailed above, I made such a request in the current year [and in previous years] but [in each case] the landlord failed to comply with his covenant. Because the landlord is himself in breach of covenant he is not entitled to enforce the tenant covenants in the lease, including the service charge covenant. Accordingly, the service charge demanded from me is not due.

 

Alternatively, because the landlord is himself in breach of covenant it is not reasonable for him to recover the premium for the insurance through the service charge, for the reasons set out below.

 

 

B. As to Reasonableness -

 

The facts are as follows :

 

The insurance premium for the buildings insurance was not reasonably incurred, within the meaning of section 19(1) of the Landlord and Tenant Act 1985, because -

 

(1) In my letter dated (date), I asked the landlord’s managing agents to disclose to me what comparative quotes he had obtained for the insurance cover. He has not supplied me with that information. I believe this is because none were obtained.

 

Also, the landlord has not changed insurers, despite increases in the insurance premium costs to £_____ per annum.

 

I obtained a comparative quote [some comparative quotes]. For comparable cover, ABC Insurance quoted to me a premium of £____ including tax [and XYZ Insurance quoted to me a premium of £____ including tax].

 

 

(2) In my letter dated (date) [and (date)], I requested that the landlord disclose to me all secret commission paid to him or to his managing agents by the insurer, and requested that this be credited to the tenants in the service charge accounts, in reduction of their liability. But he has made no such disclosure to me, and has given me no such credit in the accounts.

 

It is a matter of common knowledge that commercial insurers pay commission to brokers who introduce insurance business to them. The landlord has [persistently] failed to disclose the existence or amount of this commission to me, or to account for it in the service charge accounts.

 

In my letter I required the landlord to produce the policy and the latest premium receipt for each of those years, but, in breach of covenant, he did not do so.

 

 

(3) The insurance cover obtained is against risks which the landlord's covenant in the lease does not require, including (examples) earthquake and terrorism.

 

The lease requires, in clause 1, that I reimburse only the cost of insuring against (example) "fire and other risks". I have lived in (example) Surrey all my life: other risks that were usual in Surrey at the date the lease was granted, in (example) 1970, did not include earthquake or terrorism.

 

 

(4) The insurance obtained is for levels of cover not appropriate to the property: the amount of the cover is wildly over-stated.

 

(example) It includes employees liability cover of £10 million, but this is a residential property: there are no employees. Further, the managing agents are in Scotland but the property is in Surrey. The managing agent‘s employees (if any) do not visit the property: no maintenance or repair has ever been carried out by the managing agents, as the itemisations in the service charge accounts demonstrate.

 

(example) The insurance includes public liability cover of £5 million; but (a) these are not commercial premises, and (b) there has never been such a claim in 23 years.

 

(example) It includes cover of £20,000 for contents of common parts: but the only contents are the stair carpet and some electric light fittings, all thirty years old, worth in all £200.

 

 

The high premiums are unreasonable given the claims record of the property: no claim has been made under the insurance in the 20 years I have lived there, from 1987 to the present.

 

 

My reasons for disputing the Service Charge accounts in this respect are :

 

The insurance premium is a relevant cost that was not “reasonably incurred”, because -

 

(1) The landlord’s statutory duty under section 19(1) of the 1985 Act, in a residential lease, is to obtain insurance on reasonable terms: Forcelux Limited v Sweetman [2001] 2 EGLR 17.3 LT. He has not done so.

 

In order to act reasonably, it is necessary for the landlord to approach more than one insurer. He must properly test the market by ‘shopping around’. He did not do.

 

I requested in writing that the landlord obtain comparative quotes from other insurers, as detailed above, but none were disclosed to me: I submit this is because none were obtained.

 

This demonstrates a failure [or: a repeated failure over many years] to make any attempt to obtain a competitive quotation for the business.

 

The landlord could have obtained a lower premium: the comparative quotes which I obtained were very much lower, only (example) one-third of the amount which the landlord is claiming for the current year.

 

 

(2) I requested in writing that all secret commission paid by the insurer to the landlord or his agents be credited to the tenants in the service charge accounts in reduction of their liability, but no such credit was given.

 

This is unreasonable because the landlord took the decision where to place the insurance based on this secret profit, not on the cost of the premium.

 

The failure to disclose the amount of the commission is also unreasonable, non disclosure raising an inference that the amount of the commission is excessive.

 

 

(3) The insurance obtained is against risks which the landlord's covenant to insure does not require.

 

Clause ___ in the lease requires the landlord to insure only against (example) "fire and other risks", but the insurance obtained is against risks which the clause does not require, including (example) earthquake and terrorism.

 

The property is located in Surrey, and the lease was granted in 1970. The parties to the lease must have intended the clause to be interpreted in the light of the risks that were usual in that county at that date. These did not include (example) earthquake or terrorism, as detailed above.

 

 

(4) The insurance obtained is for levels of cover not appropriate to the property, as detailed above :

 

(a) (example) The cover obtained includes employees liability of £10 million, but this is a residential property, not commercial premises: there are no employees.

 

(b) (example) The cover obtained includes public liability of £5 million, but this is a residential property, not commercial premises.

 

© (example) The cover obtained includes £20,000 for the contents of the common parts, but the only such items are thirty years old and worth only £200.

 

 

(5) The nature of the landlord's breach of his insuring covenant evidences a failure to pay the premium: no production, on request, of the latest premium receipt. Where the premium was not paid, the entire amount of the premium is unreasonable.

 

Alternatively, that breach means there is no evidence that the amount actually paid is the amount stated in the service charge accounts. The amount demanded in the accounts cannot be reasonable if it is not the true amount paid for the cover.

 

Alternatively, the landlord has not proved that the terms of the insurance are reasonable as, in breach of covenant, he did not produce a copy of the policy.

 

 

C. As to Section 30A of the Landlord and Tenant Act 1985 -

 

The facts are as follows :

 

I made a written request to the managing agents by letter dated (date), requiring the landlord to supply a written summary of the insurance under section 30A of the Landlord and Tenant Act 1985 (added by section 43(2) and schedule 3 of the Landlord and Tenant Act 1987), with which he has not complied.

 

 

My reasons for disputing the Service Charge accounts in this respect are :

 

The landlord did not supply a written summary of the insurance under section 30A of the Landlord and Tenant Act 1985 in response to my written request.

 

Section 30A of the 1985 Act was added by section 43(2) in the Landlord and Tenant Act 1987, and the Schedule to the 1985 Act was added by schedule 3 of the 1987 Act.

 

Paragraph 2(1) in the Schedule to the 1985 Act says :

“2(1) Where a service charge is payable by the tenant of a dwelling which consists of or includes an amount payable directly or indirectly for insurance, the tenant may require the landlord in writing to supply him with a written summary of the insurance for the time being effected in relation to the dwelling.“

 

Paragraph 2(3) in that Schedule says :

“(3) A request is duly served on the landlord if it is served on -

(a) an agent of the landlord named as such in the rent book or similar document, or

(b) the person who receives the rent on behalf of the landlord”

 

Paragraph 2(4) in that Schedule says :

“(4) The landlord shall, within one month of the request, comply with it by supplying to the tenant … such a summary as is mentioned in sub-paragraph (1)”

 

Paragraph 6 in that Schedule says :

“6.(1) It is a summary offence for a person to fail, without reasonable excuse, to perform a duty imposed on him by or by virtue of paragraph 2 …”

 

Accordingly, where the landlord has failed to supply to the tenant a written summary of the insurance complying with section 30A of the Landlord and Tenant Act 1985, the cost of the insurance is not reasonably incurred under section 19(1) of that Act, in its entirety, so he is not entitled to recover the insurance premium through the service charge.

Note

 

This is a self-help forum in which users share their experiences. Assistance is offered informally, without any assumption of liability. Use your own judgement; obtain advice from a qualified and insured professional if you have any doubts.

 

This posting gives general guidance only. It is not an authoritative statement of the law. Consult a Solicitor for specific advice before deciding on any course of action.

 

 

Further information:

 

Assured and Shorthold tenancies - A guide for tenants

 

Renting and Leasehold - Advice from Shelter

 

 

All posts are opinion only

 

 

If you've found my suggestions useful, please click on my star and add a comment

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  • 3 years later...

Please help. A builder instructed a scaffolder to put scaff on the

house for work he was doing. The rubbish collection truck came

very early in the morning before 6 am in november. The truck

caught the scaffold and dragged it 3 feet breaking the front of the

house .

The scaffolder put lights on before the police arrived. So who is

culpable and what shall I do? the builder messed up the work and

the scaffolder would not take the scaff away!!! Argh

 

Building insurance and or court builder/scaffolder - and.or city council?

 

My brain hurts thanks

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Is this a genuine scenario or just a wind up to excercise our brains! for your benefit!

What is your connection, owner, builder etc.

I would of thought that if it happened in November somebody would of actioned it by now:???::-o:flypig:

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Can we seperate intheblack's post from the OP.

 

Simple answer for itb, LL claims against his buildings policy and lets them sort it out.

(if this answer is used in any academic or published work, it should be properly acknowledged and cited in refs used)

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re OP I hope there are plenty of LLs on the Tribunals.

 

Whilst a res T may seek confirmation that the building is insured, he does not have the right (IMO) to inspect the Policy or Premium paid.

LLs are required to have buildings insurance, often with specialist Insurers, which differs from normal domestic Ins.

The T would not be privy to the renewal quotes obtained from alt providers, nor their T&Cs

As for employee cover, any tradesman contracted by LL eff becomes a sub-contracted 'employee' and the LL themselves are tech an employee of the business.

I cannot believe that a breach of LL responsibilities abrogates T of their responsibilities.

Turn this on its head, as soon as T is in breach of their resp (Convenants) eg failure to pay rent on time, the LL is freed from all his/her non-statutory responsibilities? I don't think so!

 

I suuggest ed999 provides successful case histories

 

Comments welcomed

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sadly it is not a wind up - this is retro active action as the front of the

building is now dropping off

 

I am the owner - builders from hell and I looked up building insurance

threads. Someone please clarify do I start my own thread rather than

jump into somone else's?

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Whilst a res T may seek confirmation that the building is insured, he does not have the right (IMO) to inspect the Policy or Premium paid.

 

 

Incorrect, in 99% of cases.

 

The standard insurance clause in a long lease, granted for a term exceeding 21 years, contains a covenant by the landlord to produce the insurance policy and the latest premium receipt to the tenant on request.

Note

 

This is a self-help forum in which users share their experiences. Assistance is offered informally, without any assumption of liability. Use your own judgement; obtain advice from a qualified and insured professional if you have any doubts.

 

This posting gives general guidance only. It is not an authoritative statement of the law. Consult a Solicitor for specific advice before deciding on any course of action.

 

 

Further information:

 

Assured and Shorthold tenancies - A guide for tenants

 

Renting and Leasehold - Advice from Shelter

 

 

All posts are opinion only

 

 

If you've found my suggestions useful, please click on my star and add a comment

Link to post
Share on other sites

My advice is applicable only if the premises are entirely within England and Wales.

 

sadly it is not a wind up - this is retro active action as the front of the building is now dropping off

 

I am the owner - builders from hell and I looked up building insurance threads. Someone please clarify do I start my own thread rather than

jump into somone else's?

 

 

If the leases were granted for more than 21 years, i.e. they are long residential leases, the standard arrangement is for the landlord to covenant to be responsible for repairing the main structure and exterior of the building, and for the lease to contain a mechanism for him to recover the cost of so doing from the tenants, usually through the service charge.

 

The tenants covenant to pay the service charge annually on demand. The landlord covenantS to insure the main structure of the building, so the tenants will typically be paying only the insurance premium through the service charge. In the event of actual damage, the insurer will arrange repairs.

 

Thus the cost is spread over many years, and the tenants are not left to face a huge bill for structural repairs is a single year.

 

If the landlord does not comply with his covenants, the tenants can sue him for breach of covenant.

 

The usual outcome will simply be an insurance claim, for the cost of the repairs to the main structure of the building.

 

 

In the circumstances described, the landlord could probably succeed in a legal claim in court against the driver of the vehicle that damaged the building, for negligence, in an ordinary road traffic accident claim. The driver has no defence: he can hardly say the building backed into him!

Edited by Ed999

Note

 

This is a self-help forum in which users share their experiences. Assistance is offered informally, without any assumption of liability. Use your own judgement; obtain advice from a qualified and insured professional if you have any doubts.

 

This posting gives general guidance only. It is not an authoritative statement of the law. Consult a Solicitor for specific advice before deciding on any course of action.

 

 

Further information:

 

Assured and Shorthold tenancies - A guide for tenants

 

Renting and Leasehold - Advice from Shelter

 

 

All posts are opinion only

 

 

If you've found my suggestions useful, please click on my star and add a comment

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