Leaseholders face demands for £5,000 each
Why is it ALWAYS the leaseholder controlled sites that come off worse with insurers?
It is almost as though there were a cosy cartel at work between monetising freehold owners and the insurers
And can we please have the delayed leasehold insurance investigation by the Financial Conduct Authority published now?
Leaseholders at Compass Point, in Wythenshawe, Greater Manchester, have 21 days to pay insurance bills of £5,000 – as the cost of the annual insurance for the block has risen more than 20-fold from £12,000 to £250,000.
It is an open question what will happen if the block remains uninsured, although LKP is aware of several previous occasions when this has happened, often for some months.
According to Inside Housing’s Pete Apps, who broke the story yesterday, the building requires work to fit missing fire breaks in a timber-frame structure and remove timber balconies – both works exempt from government funding aid.
The building’s original insurer, Allianz, declined to offer a new policy in September 2021 after an EWS survey which found that works needed to be undertaken.
Clear Building Management found another insurer, Touchstone Underwriting, but premiums rose from £12,000 to more than £150,000, and with only 40% of the rebuild value covered by the insurance.
This year the cost is £250,000 for full rebuild cover, but this pushes the premium up to £250,000 – £5,000 each household. The insurer has not offered any option for paying in instalments and demanded the full fee upfront.
“The unaffordability of building insurance premiums for leaseholders is the silent issue punishing leaseholders across the UK,” said Ian Hollis, of Clear Building Management, which is an LKP accredited managing agent in Manchester.
“Clear Building Management hasn’t taken a fee for more than 12-months, in the knowledge that the building’s cashflow is tight.”
Mr Hollis and his team is seeking to raise awareness of the crippling costs of building insurance premiums for leaseholders and suggesting a Fire-RE reinsurance vehicle similar to support from insurers for protection from terrorism – “PoolRE” – and flooding – FloodRE.
CBM believes that this ‘FireRE’ scheme needs to be urgently introduced, and must have the Treasury as ultimate underwriter so that mass-market insurers can re-enter the market and get affordable re-insurance for the fire risks.
Residents of 52 flats risk being ordered out of property if they cannot pay £250,000 insurance bill
In response to questions from Inside Housing, CBM said the building “may become uninhabitable” if it is not insured, but added that “we are doing everything we can to identify a way to get the premium funded, so that this will not be an issue”.
Back in January then Housing Secretary Michael Gove told the Financial Conduct Authority to investigate the leasehold insurance market, which was “failing” leaseholders.
The report is already late.
“This issue is happening now, in buildings everywhere, that like Compass Point, are suffering excruciating insurance premiums with onerous terms, and we are committed to doing whatever we can to raise awareness of the issue and get leaseholders the financial support they need,” said Hollis.
Giles Grover, a spokesperson for the End Our Cladding Scandal campaign, said: “The government has allowed the insurance industry to profit from the building safety crisis for too long in the vague hope that the broken market will correct itself.
“Rather than stepping in directly, they have been trying to gently nudge the insurers to produce a solution. This ongoing reliance on industry to do the right thing has failed miserably and [new housing secretary] Simon Clarke must recognise this and act swiftly to ensure more is done to clamp down on this immoral behaviour.”
Leasehold Knowledge Partnership comments:
“LKP is aghast at the position of the 52 leaseholders at Compass Point in Wythenshawe, who face a hike in insurance costs that will see each leaseholder having to pay £5,000 a year.
“LKP can only offer sympathy to those involved and Clear Building Management, which is dealing with this.
“Since the Grenfell Tragedy in June 2017 we have seen government fumbling about with the building safety crisis, setting off panic while simultaneously procrastinating over providing effective action.
“The hike in insurance costs – leaving aside commercial opportunism – is a direct result of this.
“But why does it repeatedly hit the leaseholder-controlled blocks hardest?
“It is almost as though there as a cosy cartel at work between insurers and freehold owners, and leaseholder controlled blocks are not a member.
“Leaseholders look forward to the now delayed results of the investigation into leasehold insurance by the Financial Conduct Authority that was ordered by then Housing Secretary Michael Gove, who took a markedly robust approach to the building safety scandal, imposing a £4 billion levy on housebuilders as part of a sector-wide failing.
“It must be hoped that the FCA discovers its backbone in dealing with the scandalous state of affairs in leasehold insurance.
“Repeatedly, it is the leaseholder controlled blocks that come off worse with insurers.”
Related posts:
Cladding victims now being hit by insurance hikes, reports BBC R4 You and Yours
Rendall and Rittner … no insurance commissions, but it owns an offshore ‘captive’ insurance company making a 40% profit on leaseholders’ premiums
Financial Ombudsman urged to look into leasehold insurance scams
Michael Gove: Is this the robust inquiry into leasehold insurance fiddles that you wanted from the FCA?
Insurance insiders call for an end to secretive leasehold insurance commissions following Canary Riverside ruling
South Cliff Tower and Southdown Surveyors regarded £3m repairs consultation as ‘something to be endured’ rather than ‘influence decision making’
Sounds like a bad management company to undertake EWS when it was not required for the building, should this not be covered by management companies insurance
It may well be an over simplification – but when we`ve had about 20 housing ministers in as many years, it`s hardly surprising that none have got to grips with the various housing problems and disasters, adding that the latest incumbent will not be in place for very long either, to be then superseded by another with likely different approaches and as is usual, not thinking through the consequences of the decision making. The underlying issue is that of short-termism and policies that are dictated by the events of the day, unassisted by the fact that the department for housing has long been seen as a launch-pad for the political careers for the at the time currently favoured, rather than for the skill-sets that could have been brought to the table. It`s the same in other sectors, starkly exampled in the expanding residential Park Homes market that has much become a haven for seriously crooked operators, a problem now so big but about which the warnings were given, that no-one is willing to tackle it beyond comforting rhetoric and token gestures. In short, every problem has a cause and until such time as the roots of the causes are addressed, the only beneficiaries will be the billionaire investors who prey upon the simple desire of ordinary folk to have an affordable roof over their heads, Thank God for the LKP, otherwise today, we`d probably be dealing with the high costs of insuring mud huts for the masses.
I am unclear as to whether the Leaseholders here are now the Freehold landlords or whether they are simply managing the flats. If the latter then the original Freehold landlord still controls the Insurance, not the Leaseholders. If the former, in my own experience, when the we, the Leaseholders completed Collective Enfranchisement and became the Freehold landlords, I was able to negotiate a lower insurance premium and remove the additional surcharge added by the former Landlord. While I accept that in many cases, insurance premiums increase when Leaseholders take control of their properties, it is not always the case, as suggested by LKP.
The immediate benefit of RTM was it took away the right of unscrupulous freeholders to provide Buildings Insurance for flat premises. I have already posted on this before now but as it acts as a salient example/lesson of crooked conduct. I will repeat it:
In 2004, our Freeholder demanded £23,500 per annum as a premium for the premises. The market cost was c. £7,500 p.a. As provisions of the 2002 Act came into force in 2004, we formed RTM, and applied to the then Leasehold Tribunal (old LVT) and won refunds backdated to 2002.
Today, 19 years later, and notwithstanding incremental annual increases and claims on the policy, our Buildings Insurance premium is at c. £15, 500 p.a: that is a saving of c. £170,000 -200,000 over the intervening period.
As the handful of unscrupulous Freeholders of flat premises were found out by the LVT and ordered to refund such excessive and extortionate amounts, they invented the doubling Ground Rent (GR) racket for flats as a replacement. Thereafter, anyone applying for a lease extension had a Deed of Variation to the existing lease imposed. That is, the customary and relatively old peppercorn GR was done away with and replaced with a new GR of c. £250-350 pa doubling etc. It would appear that once done, this nefarious activity can not be undone, as the newly affixed Deed signals leaseholder consent. And as this is all set up usually through use of “in-house” solicitors, it has enabled such Freeholders to continue to fleece unsuspecting leaseholders with impunity and over a very long time. .
This fraudulent activity will seemingly continue until the “easier, simpler, and cheaper” terms promised by this Government “in this present parliament” are finally enacted. That is, Leasehold Reform, Part 2, for existing leaseholders, and as recommended by the Law Commission, CMA, and the all party APPG must now be brought forward as fast as can.
This broken industry will not fix itself. The endemic fraud that, because of the activities of a handful of unscrupulous freeholders, lies at its heart as at present will not be eradicated without the promised legislation.