In default of their mortgages. Some furloughed. Some unemployed.
All looking to government …
By Harry Scoffin
While some cladding victims use lockdown to get creative with their finances due to 400% insurance hikes, others cannot find coverage for love nor money.
BBC Radio 4’s You and Yours, the consumer affairs programme, reported on Thursday the story of Birmingham’s Brindley House, a 182-flat block with flammable cladding and insulation where leaseholders are in default of their mortgages and insurance coverage is non-existent.
Residents hope they will not have to be evacuated as their leaseholder-controlled right to manage company body races around the clock to find a deal.
Presenter Melanie Abbott heard from one leaseholder that Brindley House came close to reaching an arrangement with an insurer.
Even then, the policy would have been sub-optimal as leaseholders faced having only half of the building insured, according to Michelle Henry, who has been working hard to find a solution:
“The best one we had – and it was never actually finalised – would have only been for £20m worth of cover, when the building normally is insured for £40m.”
It would not have come cheap either:
“It was going to cost about £350,000 and that’s before the taxes.”
Ms Henry said the insurance bills were quoted at between £1,700 to £2,500 per leaseholder, depending on the square footage of each property. It is unclear whether this would have been levied on a monthly basis.
In a debate in Parliament last month, local MP Shabana Mahmood raised the case of Brindley House and claimed that “the commission and taxes alone” on the premium would have been “more than the whole of their premium for the previous year.”
Leaseholders would also have been badly exposed in the not-so-unlikely event of a fire.
The excess was set to be £350,000.
They would have had to find this money from somewhere if their homes burnt down.
Presenter Melanie Abbott interjected to say “that’s a massive excess, isn’t it?”
“It’s crazy,” Ms Henry replied.
The leaseholder added that residents were bracing themselves for a similar excess. If, that is, they are able to clinch any agreement at this late stage.
“We have to raise the funds between us, which isn’t an easy process. At the moment, we’ve been having meetings with the board of directors, trying to work out where we can pull payments from or to raise the money quicker. Otherwise, it just means that we could be without insurance for a while longer,” she said.
But every day without insurance means another day which could see the leaseholders evacuated as a jittery freeholder seeks to take back control:
“I mean, just not being insured, although that is scary, at the moment the bigger fear for us is that we could be evicted because are mortgages are obviously in default at the moment.
“Part of the agreement is that you have the building insured, and I live in fear – personally [speaking] – that the freeholder might decide to evict us.”
But she wouldn’t blame them. They have an investment to protect, after all:
“And that is not to be spiteful [to the freeholder], that’s just to protect their asset. It would be much easier and more affordable to get insurance in the building if we’re not in it.”
In any case, Ms Henry said that some leaseholders at Brindley House have confirmed they have no ability to pay extra service charges, with the insurance hikes expected to occur against a backdrop of mass unemployment induced by the Covid-19 pandemic.
While some leaseholders at the development have been furloughed and hope to return to work shortly, others have either been made redundant or face losing their jobs.
“It’s quite scary,” she added.
Flat owners at a tower block in Birmingham say they face a joint insurance bill of about £500,000 due to changes brought in the wake of the Grenfell Tower tragedy. Last year, owners of the 182 flats in Brindley House paid £43,000.
Remediation works must be completed by April next year in order for the leaseholders to get insurance again.
With costs for cladding removal alone valued at between £5-10m, there are big question marks over where the money will come from.
Brindley House leaseholders are hoping that the new £1bn Building Safety Fund will cover them, but are not hopeful given the sheer number of affected sites up and down the country.
To add another worry into the mix, MPs heard on Monday that insulation would not be covered by the taxpayer monies. The bill for removal of combustible insulation at Brindley House has not been made public.
Government has so far refused to offer financial aid to cladding leaseholders hit by gargantuan bills because of edgy insurers.
Unlike nearby Islington Gates development, a leasehold cladding block also under resident control but which is thought to still have insurance cover, though for how much longer is the multimillion pound question, Brindley House is in even more trouble.
LKP wonders whether leaseholders there can even hold on without insurance until April 2021.
Your and Yours also played excerpts from the evidence given this week to the Communities Select Committee by representatives of the UK Action Cladding Group (UKCAG) and Manchester Cladiators, who spoke powerfully of the myriad issues facing leaseholders in dangerous apartment buildings.
Addressing the powerful cross-party group of MPs on Monday, new building safety minister Stephen (Lord) Greenhalgh insisted that the industry were not calling for government assistance along the lines of Poll Re, the UK’s specialist terrorism insurer for at-risk commercial property, or Flood Re, for homes in flooding areas.
On Thursday, he tweeted a breakthrough following his talks with the key players:
The BBC programme also heard from the CEO of the Association of Residential Managing Agents (ARMA).
Nigel Glen cited a recent survey done of his members which, he said, showed 2,200 leasehold cladding sites are experiencing material increases in their insurance premiums.
He said that many affected sites will only be able to go to their current insurer, “so you’ve lost your ability to get competitive quotes”.
Mr Glen then pushed back at suggestions that the status quo over insuring dangerous-clad buildings is sufficient and that there is no need for state intervention in this market:
“Well, I think we need to look at that. It’s obviously not working. We’ve got people who are getting quotes four times what they’re normally doing, or can’t get quotes at all.”
Concluding his remarks, Dr Glen joked that even the government’s flagship Flood Re scheme – which cladding campaigners want repeated to ease their insurance woes – excludes leasehold property because it was somehow deemed commercial, an issue LKP first brought to public attention six years ago.