Deadline for responses: midnight Monday 24 February
Leaseholders have until midnight on Monday 24 February to tell government what you think about insurance commissions and permitted insurance fees of managing agents and freeholders.
The consultation is part of the secondary legislation under the 2024 Leasehold and Freehold Reform Act.
Background
Since it began in 2012, LKP has been campaigning against the scandal of hidden leasehold insurance commissions. We were instrumental in getting the Competition and Markets Authority and the Financial Conduct Authority to investigate the issue, and the inclusion of insurance fees in last year’s Leasehold and Freehold Reform Act – now to be given detail in secondary legislation – is a direct result of our efforts.
In addition, two of LKP the trustees have taken actions on commissions for their respective blocks and we have helped many blocks that have also challenged insurance costs.
LKP trustee and City solicitor Liam Spender is leading a large class action on commissions via his legal firm, Velitor Law.
LKP urges all leaseholders to consider taking part:
Back in 2014 we reported that the FCA accepted that there was a problem with leasehold building insurance with unreasonably high commissions but that it had decided to do nothing about it.
At the end 2014 the Competition and Markets Authority published its report into property management, writing:
“Insurers may pay a commission or fee which can distort incentives in relation to the purchase of buildings insurance. In many cases it is the freeholder who places insurance and receives commission; the property manager may have no involvement, and there is no transparency of commissions to leaseholders.”
Following the scandal around insurance costs post Grenfell, the rules have already started to change which means leaseholders have more powers to raise complaints with the Financial Ombudsman Service, and there are more rights to see insurance documents.
Some commissions have been stopped, and providers have created obligations to ensure the insurance policy is designed for the leaseholders’ benifit.
This present consultation considers what permitted fees will and will not be allowed for agents and landlords.
The problem for the government is determining which fees are legitimate and which might be used to continue that past bad practices that LKP has exposed.
Purpose
The intention of the new rules is that by making permitted fees sit within the service charge regime they are more easily challenged for reasonableness at the tribunal.
This helps to solve a particular problem with landlords sitting outside regulation.
Historically, even getting disclosure of the landlord’s commissions was difficult, if not impossible as far as the FCA was concerned, as many landlords were unregulated and therefore outside its jurisdiction.
The tribunals have repeatedly determined over the years that there is a legitimate right to charge for work needed to arrange insurance. That is, provided it is permitted by the terms of the lease and that it is not out of line with market prices.
The issue with the Tribunal’s approach is that it often falls to unrepresented leaseholders to argue against these charges without full disclosure from freeholders. Unsurprisingly, this had led to a large number of cases which have decided in the freeholders’ favour.
Another problem has been that up until now there has been no easy means to quantify what the freeholders and agents claim is legitimate work. Evidently, the government would not be proposing a system of permitted fees if it felt that no fees at all were justified.
The aim of this proposal is that all fees fall within the costs that can be challenged at the tribunal.
At the same time, the secondary legislation to the 2024 Act will give leaseholders more rights to their costs if they do challenge insurance commissions or fees at the tribunal, and win.
Currently, the property tribunal system is unbalanced with only the landlord able to obtain legal costs via the terms of the lease and the tribunals powers are only to limit some of those costs IF the leaseholder wins.
Our view
The first thing to note is that we do not think all leasehold insurance fees are wrong.
There will still be insurance fees on leaseholder controlled sites, and at commonhold sites for that matter.
It may be perfectly legitimate for a managing agent to take on some of the claims handling for a fee, but that fee should have been reflected by a reduction of the premium.
Normally, the insurance company would appoint loss adjusters who earn their fees from the insurance company.
If a managing agent, or a freehold-owning landlord, were to carry out some of that work it would firstly have to be either as an FCA-regulated agent/landlord or involve work that falls outside the regulation system.
This automatically limits what could be deemed a legitimate fee.
Inevitably, we can expect landlords to provide a long list of services they provide for a fee, so the regulations will need carefully to consider what work might be legitimate and what might involve very limited work, or indeed none at all.
Testing the market is often quoted as something the landlords or agent might do. In practice, it’s the broker that does this work. Brokers do so as part of their fee, so again that should limit the costs being passed on.
Under most leases the insurance is collected as part of the standard service charges so there can be no argument that collecting the insurance element somehow attracts an additional fee.
Even when the insurance is claimed by a separate charge the agent would logically have built this cost into their management fee when they took on the contract to manage the site.
Where things become more complex is claims handling.
If the managing agent helps a leaseholder(s) make a claim that may fall outside the standard contract, but it would also be limited by whether the agent were FCA regulated or not.
Different approaches will also be needed for different sizes of blocks. For large blocks with bespoke policies the agent might be providing information to the specialist broker but most of their work might be seen as falling within their standard fees. For smaller sites the workload for the agent might change from year to year.
LKP guide to completing the consultation
Q1 Asks about the groups involved in the supply chain of insurance and whether you consider other groups are involved. If you have knowledge, you might mention the role of offshore captive insurance companies, and loss adjusters.
Here is an example of an offshore captive insurance company dealing with leasehold insurance:
Q2 Asks if leaseholders think the current system of insurance commissions is fair. It is almost inevitable that leaseholders will reply that they do not think the system is fair
Q3 Asks if leaseholders understand what payments are currently made and mentions “sharing of commission – or be more indirect such as through retaining money from discounts or non-monetary payments”.
By their nature, such payments will be unknown to almost all leaseholders but the fact this comment is included suggests the government is aware that these payments exist.
Leaseholders might wish to comment on the total lack of transparency with commission payments
Q4 Asks if leaseholders have tried to challenge these costs and, if so, how have they done so.
Leaseholders might say that they have challenged and mention the outcome or explain why it is too difficult to challenge under the current system of leasehold insurance arrangements.
Q5 Asks agents and landlords about their payments.
We assume they will argue that all payments are entirely legitimate. There is nothing for leaseholders to answer in this question, unless they want to make the point that it is doubtful that anyone is going to accept that agents and freeholders have accepted illegitimate payments.
Q6 Is also for agents asking which payments are inside and outside the FCA regulated systems.
Q7 Asks about the plan for permitted payments and whether you agree with the new system. The offered options are yes and no, with an additional option for comments.
Whether the new system works or not will depend on which fees are or are not allowed and how large these charges can be. The purpose of the regulations is to make things more transparent.
Q8 Asks what activities related to insurance are carried out by landlords and agents that attract payment through fees.
As a leaseholder, you may or may not know what happens, but you might raise the point about whether the costs are already covered by the broker’s fees.
Q9 Asks what work carried out on insurance should be chargeable via the service charge.
This seems a question for technical experts, and for the government to decide.
Leaseholders will want to ensure that any costs are transparent and comparable with the market rate.
All costs should be able to stand the challenge that they are needed to obtain the cover or reduce the cost of the cover
Q10 Asks what work should not be chargeable. The perhaps obvious answer to this is work not allowed under the terms of the lease but might include anything that is designed to add to the freeholders or agents profits rather than provide benefit to consumers.
Q11 Asks how the allowed fees should be calculated. Leaseholders may feel this is for the government to address. The test should be that the fee can be proved to be reasonable and that the tribunal or the regulator or the government have the power to intervene if they think the fees are unreasonable.
Q12 Asks if there should be exceptions to the rules on permitted fees. We’re not sure that there should be any.
Q13 Asks if you think the current system to challenge unreasonable service charges is sufficient.
Since a key part of the 2024 Act is to add new protections to consumers to help them challange the costs the logical answer to this question is that the current rules are not working.
Q14 Asks if you think the insurance fees should be subject to additional criteria to ensure it is proportionate and fair. There is an option to say the reasonableness test under the 1985 Act is sufficient but it would be logical if the regulations added some specific test that should be met.
Q15 What additional criteria from Q14 would you suggest. Again this can be a very technical issue which the government should assess, but logically the fees should demonstrate that the fees are not impacted by any potential conflict in the supply chain e.g where the agent or landlord owns the broker or an offshore captive. It should show what benefit the consumer gets for the fee, it should show value for money.
Q16 Ask what evidence is needed to prove the fees are fair and proportionate. For leaseholders there is either the evidence needed to bring a case at the tribunal if they think the charges unreasonable or the evidence needed to prove the fees are fair so they do not have to go to the tribunal
Q17 Ask what challenges you see in implementing the new rules. This is another question mainly for agents
Q18 Asks what you think might be the impact on costs. Logically for the rules to work the costs must go down.
Q19 Asks if you think sharing commissions with freeholders and agents (ie making any fees part of a variable service charge cost). The answer is yes because only variable costs can be challenged at the Tribunal.
Q20-22 Asks what information you want to see regarding the fees. To an extent this must depend on the size of the block, but in principle a breakdown of the charges and why they are needed. Over time, as part of the 2024 Act, we will begin to see comparator data from across the sector. This data needs to be available to leaseholders.
Should there be a cap on fees? There are dangers whichever option the government chooses on this one. If the fees are capped they might be set too high, if they are uncapped and leaseholders need to challenge at the tribunal the costs regime has to change.
How does the government ensure that fees remain fair over time? Feedback from the various government agencies and regulators should provide sufficient data to show if the system is working
Q23 Asks about the impact on protected characteristics
Q24 asks about environmental chacicteristic
Q25 Asks about enforcement mechanisms for non compliance? One of the biggest problems in the leasehold sector is that there is no penalty for non-compliance. A system of fines that increment for repeat offenders might be the best deterrent to bad practice. The sectors various regulators should also ensure fees are reviewed and the FCA and Financial Ombudsman Service should annually report on matters reported to them. The existing dispute resolution systems should oversee failures of the system and be supported by the means to introduce fines.
Q26 Asks about local authorities. This may not be a question for leaseholders
Q27-32 Asks about the location of the building and and differential impact on Wales
What’s missing from the consultation.
The consultation is limited to what fees can be charged. The elephant in the room is the policy wording itself.
Leaseholders might want to emphasise the importance of information and transparency
We all know the insurance companies have been increasing the level of excesses.
This creates a whole set of problems about who pays it and how that excess is paid for. It also forces more and more leaseholders to have to take neighbours to court, for example when one flat leaks into another
We know that third party landlords have a keen interest in ensuring the policy wording works for their benefit rather than for the leaseholder.
The FCA has introduced stronger rules about ensuring the policy is worded for the leaseholders’ benefit, but there is no track record of knowing whether this does and does not work
Many policies fail to protect the leaseholder if the building has to be decanted
The new system should impact the relationship between leaseholders and agents/landlords. It should remove a key area of contention and distrust.
Mixed-use blocks. There has always been a concern that some landlords skew the split of costs between different part of a mixed-use development.
The regulations need to ensure the split of costs is transparent and proportionate.
The issue of terrorism cover, and whether it is needed or correctly costed for the residential element in many sites, is potentially a wider consideration.
Leasehold houses. The leaseholder in these circumstances may be required to follow certain rules, including noting the landlords interest in the property.
There seems no legitimate reason why the landlord should charge a fee. The leaseholder is responsible for ensuring the policy has the relevant terms at their own cost so the landlord should be liable for their costs in checking the policy and only be able to charge a proportionate fee if the insurance is demonstrably deficient in some way.
Commissions that sit outside the policy
There is no way for leaseholders to discover, let alone challange, what are knowing in the industry as “soft commissions”.
For example, this is where leaseholders fund some or all of the landlord’s office insurance as part of a block policy, or where a developer having insurance costs subsidised on sites under construction through a block policy paid for by leaseholders.
Related posts:
Leaseholders pay up to 60% more for buildings insurance because of secret commissions, reports The Times
Michael Gove: Is this the robust inquiry into leasehold insurance fiddles that you wanted from the FCA?
How you get scammed on insurance … with tips from LEASE!
Freeholders’ ‘cowboy’ insurance commissions at leaseholders’ expense attacked in The Times
John Christodoulou ‘lamentable’ lack of transparency over excessive £1.6m insurance costs at Canary Riverside
Right to manage reforms announced … days after Chelsea Bridge Wharf wins RTM
“It may be perfectly legitimate for a managing agent to take on some of the claims handling for a fee, but that fee should have been reflected by a reduction of the premium.”
How would that be legitimate? In practice our MA goes to absurd lengths to discourage anyone from making a claim. We advise to go directly to the insurer. For all we know the kickback may be a bonus paid by the insurer to the MA if no claims are made in that particular year. The MA acts for the freeholder, not the leaseholder and should not be trusted to represent the latter to any third party.
The key word we included but could perhaps have made clearer was may. The position will be different depending on the size and complexity of site and type of landlord. That includes sites controlled by leaseholders. What the regulations should be aiming to achieve is to ensure any fee is a) transparent and challengeable rather than hidden b) limited to the subset of costs the government decides may be legitimate rather than the often spurious list of tasks landlords or agents sometimes claim in tribunal cases. In turn that should mean any fees much lower than in the commission based world. We are not aware of any large fees for landlords or agents that would be legitimate but don’t believe having no fees on any site. regardless of complexity is the right approach either. At my site when we had a third party landlord we showed they made a 78% markup on buildings insurance. Even so I had to settle outside the tribunal in our first case and only got the commission, which they claimed was for work, down to 20% in the second case. Challenging a declared set of fees which should be far more limited and much lower would have been easier.
The issue that your landlord may be encouraging the agent to limit claims is intended to be covered as a general point in our last comment about soft commissions. To put a potential counter argument it could also be the case they try to limit clams because a poor claims history pushes up insurance costs disproportionately. If the agents actions are driven by soft commissions this is something the FCA should have stopped a long time ago. They have no place in the leasehold (or commonhold) world.
Insurance claims management on behalf on an insured requires FCA authorisation. I read of cases where that role has been performed by companies not authorised by the FCA, which is a criminal offence punishable with imprisonment. Had the FCA used their powers to prosecute those companies involved in the leasehold sector which performed insurance regulated activities without FCA authorisation, many of the issues on which the Government is consulting now would have been resolved years ago. A managing agent which is FCA authorised and handles claims on behalf of the insured is the agent of the insured, so one would not expect that it is paid by the insurer. However, the law of agency in insurance is very complex and anomalous, suffice to say that it is the only sector where the agent of one party ( the broker as agent of the insured) is paid a commission by the other contractual party ( the insurer). There is insurance academic literature on this by Christopher Henley, Drafting Insurance Contracts and also by Prof Rob Merkin. To make things more complex, in some cases it has been argued that the broker, for some roles, is the agent of the insurer, not of the insured, in respect of the very same insurance policy.
On the other hand the insurance loss adjuster is appointed by the insurer and does not need to be FCA authorised as it operates as agent of the FCA authorised insurer.
Some quotes from “Drafting Insurance Contracts” by Christopher Henley:
– Brokerage – 3.25.2 Regarding the payment of the brokerage “…the consensus is that the insurer is liable…” rather than the insured. “The most telling point is that it is the insurer who actually fixes the brokerage, in the absence of a fee arrangement”.
– Commission 3.44.1 “Brokerage – …It is payable by the insurer… even though the broker primarily acts as agent of the insured…”
Where the insurer has agreed the net premium with the broker and left it to the broker to fix the amount of his own brokerage, the insurer applied a so called “Net rating”, on which Drafting Insurance Contracts (3.126) says: “there appear to be six complaints against net rating” (which I summarise here below):
1) not proper disclosure;
2) Potential Secret profit ;
3) “Broker owes fiduciary duty and must not place himself in a position where his interest may conflict with his duty without his principal’s knowledge and consent”;
4) “The insured is entitled to assume that the insurer will agree the commission with the broker. If this commission is in excess of the standard rate then the fiduciary obligation owed by the broker is breached with potentially dire consequences for the broker and the insurer: the broker is liable jointly and severally with the insurer in restitution for the amount of the commission in its entirety; in tort, for any loss suffered by the insured from entering into the transaction in respect of which the secret commission was given or promised; and the commission is held on constructive trust for the insured.” “The insurer might face a claim from the insured for the tort of dishonesty assisting in the broker’s breach of fiduciary duty.”
5) “there may therefore be some scope for an argument that the ability of the broker to set his own rate of remuneration is a material fact; if it is then the insurer is obliged to inform the insured”
6) “…Bribery Act 2010…makes no distinction between bribes and facilitation payments. An insurer who allowed a broker to set his own rate of commission might be seen to have enabled a facilitation payment”.
The final comment on the above six points in the book (3.126.9) reads: “…when the insurer net rates a contract of insurance, he would be well advised to obtain a written assurance…from the broker that the brokerage is nil and that the broker would obtain the informed consent of the insured to any sum that the broker wishes to take as remuneration for his services.”.
This LKP article of 2012 revealed the practice of suppressing valid insurance claims:
“Insurance racket: How you get scammed on insurance”
https://www.leaseholdknowledge.com/insurance-racket/
Mr. Vascotto,
The article “Insurance racket: How you get scammed on insurance” is a notable example of an LKP news article. I appreciate you for posting the link, and will share it with my neighbours. Your understanding of this subject provides valuable insights, and your comments were helpful in understanding the current “insurance racket”.
The concept of “Open book accounting (OBA)” frequently came to mind while reading your comments and the above link. I beleieve that replacing leasehold with commonhold and inplementing OBA practices in this industry sector would be beneficial. Additionally, leaseholders should be recognised as key stakeholders.
We did indeed!
Well done to the LKP not only for the article revealing the suppression of claims, but also for mentioning in this article the problem of the introduction of very high excesses and who is liable to pay such excess. Threatening an individual leaseholder with the application of an excess of £ 10,000, 25,000 or oven £ 50,000 or more is another tactic to avoid the payment of claims. It is a pity that the FCA looked only at commissions and neglected the management and payment of claims under multi occupancy building insurance: it might have revealed that leaseholders across England and Wales have been denied millions of Pounds in valid claims, maybe even more than hidden insurance commissions.
Managing agents charge Leaseholders a fee for their services. I believe that this fee must include the cost to obtain building insurance cover.
If the managing agent of Freeholder disputes this, I request that they provide the costings used to justify the fee for professional services. The costing will specify the included and excluded services for that charge.
Providing open, honest, and transparent communication with accurate, current, and audited information will be of use.
I guess there is a typo under Q 2 where it is stated “ Q2 Asks if leaseholders think the current system of insurance commissions is fair. It is almost inevitable that leaseholders will reply that they do not think that it is unfair”. The second sentence should say” It is almost inevitable that leaseholders will reply that they do NOT think that it is FAIR”
Yes a nasty typo now corrected
Any thoughts on what might be legitimate fees based on your expert knowledge
Martin, first of all, many thanks to you and Sebastian for all your very hard work in putting together this guide for leaseholders and thank you for correcting the typo.
I would exclude any fee in respect of FCA regulated activities where the Freeholder (FH) or the Property Managing Agent (PMA) is not FCA authorised. I would also assume that where no FCA authorisation is required, it is doubtful that the activity performed by the PMA or by the FH can be remunerated as insurance related. In the first case, the PMA remuneration should be part of their management fee. Regarding the FH, I wonder if it currently receives any other legally permitted fee from leaseholders for managing other contracts, such as utilities, repair services, cleaning services. If this is not the case, I cannot see why the building insurance contract should be an exception.
The more complex issue is where the PMA/FH is FCA authorised. In such case, it seems that the PMA/FH is appointing itself in assisting leaseholders in the performance of the insurance contract. This in turn triggers all legal requirements in respect of conflicts of interest and the law of agency, which can be extremely complex.
In general, leaseholders have no access to information to see which insurance related activity the PMA/FH carries out, so it is very difficult for them to respond to the consultation.
I have nearly 30 years of experience in insurance, but I have never had any dealing with the multi occupancy building insurance market in England and Wales in my professional life: I can say for sure that it is totally different from the insurance market I know.
The proposed building insurance cost for 01.04.2022 to 31.03.2023 was £6,138.00. However, after achieving right to manage on 22.03.2022, our chosen managing agent issued a budget showing buildings insurance of £3,655.00 for the same coverage and excesses. In my seven years here, I am unaware of any insurance claims. Achieving a 67.93% reductiond in insurance costs is astonishing in my opinion.
Mr. Vascotto,
Have you ever had a client responsible for paying someone else’s property insurance premium?
Dear Mr Burns,
in nearly 30 years in insurance and reinsurance, I have not heard of a third party paying the property insurance premium of another party. The insured pays its premium directly or through their broker and there is case law about situations where the principal or the agent is liable to pay the premium to the insurer, but this is a different, nuanced matter which arise very rarely. There may be exceptions in case of insolvency of the insured, where a lender may wish to pay the premium to protects the property which is its security against the loan, but, again, there are not very common cases.
The issue of what an agent or a landlord might do inside and outside any FCA regulated role and that which happens in the unregulated market seems key. It has never seemed clear what unregulated activities are carried out by either agent or landlord. There is normally a long list of work carried out by the landlord but as you say many of those tasks should fall within the regulated world and therefore that of the broker.
Where things get more complex is when the agent of the landlord owns the broker. Its not been clear in the past of those conflicts have been addressed. One only has to look at the firms owned in the FirstPort group to see some unusual profit figures in their broker. Knight Square Insurance brokers record a 2023 annual turnover of £4.45 million and a net profit after tax of £4 million. In 2008 turnover was £5.4 million and profit was £6.5 million
Some people have suggested there should be no fees but that seems to miss the point and may well produce the wrong approach. There seems to be no reason why these fees should be anything but limited and what ever they are should be very clearly defined.
Dear Martin,
thanks for your comments. I agree that the key aspect is to determine first which type of activity requires FCA authorisation. I believe LAFRA 2024 S 59 cannot authorise any party to carry out FCA regulated activity without FCA authorisation.
Regarding any activity carried out by the Landlord/Freeholder, I believe that as per S 59, no permitted insurance payment can be made unless the landlord/freeholder has done any work, incurred any costs or spent any time in respect of the insurance contract. As for any other activity, the freeholder appoints an agent, so there seems to be no basis for a permitted insurance payment to the landlord. The only exception might be if the landlord/freeholders manages the building directly, including insurance procurement. You surely have more experience that me to establish is that happens often. If such cases occur, that would give raise to questions about the role of the freeholder as agent of the leaseholders, with the relevant implications arising from the law of agency etc..
As you rightly say, the matter gets more complex where the managing agents owns an insurance broker, or where the property managing agent is an FCA authorised intermediary (broker) itself. I believe there is current FCA regulation and common law dealing with that aspect, but the LAFRA 2024 S 59 could further clarify and reinforce such regulation and legal provisions.
I suspect that when each aspect of these insurance permitted fees is looked in detail, in light of the FCA requirements, delegated activities, contractual agreements and the ownership relations between the parties involved, it might well emerge that there is very little left, if anything, that can actually be defined as a “permitted insurance payment”. The devil is in the detail.
Martin,
You may recall that about 4,648 days ago, the Leasehold Knowledge Partnership published the article “Insurance Racket; How you get scammed on insurance”. After reviewing the 23 comments on this platform, it struck me that very little has changed, so why on Earth are the Government consulting us on “permitted fees”?
I believe that Leaseholders currently and always have paid the managing agent for procuring buildings insurance via the service charge, why are the Government consulting on a potential new cost header “permitted fees” if approved it would amount to another unjustified hand out to the Freeholders in my opinion.
If I am wrong about the above I will stand to be corrected, provided the Landlord or managing agent published “OBA” audited statistics and figures in support of their claim or desire for permitted fees?
The 23 comments so far, including from experts and those with first hand knowledge highlight ongoing issues that have not even been addressed or resolved since 03.06.2012. Lets not “put the cart before the horse” on this one.
This is an interesting case showing the very limited obligations on a Landlord in respect of keeping the premises insured. Should the Landlord receive a fee for that? I quote from the MacGillivray on Insurance Law, 15th Edition, used as a reference book by the Courts.
“20-050. It has been held that a landlord does not commit a breach of a covenant to keep premises adequately insured if the sum insured is insufficient to replace the buildings destroyed or damaged, but not only was the tenant informed of the amount insured, to which he raised no objection, but the landlord had received proper advice from the insurers as to the amount to be insured.
Footnote 202: Mumford Hotels Ltd v Wheler [1963] 3 All E.R. 250; not reported at [1964] Ch. 117.”
Apologies for my pedantry, but I believe I spotted another typo. From Q19 onwards the questions do to match the numbering in the Government Consultation, which may confuse some leaseholders using this guide to respond.
An alert regarding Question 14, as the question is not clear in the Government Consultation.
I contacted the Government for a clarification as Q 14 says:
I have a question regarding Question 14 in the Open Consultation on Permitted insurance fees for landlords, freeholders and property managing agents:
QUOTE
Question 14. Do you think a permitted insurance fee – however calculated – should be subject to additional criteria to ensure it is proportionate and fair, or that the “reasonableness test” set out in the Landlord and Tenant Act 1985 would be sufficient?
Yes
No
UNQUOTE
Government response:
QUOTE
“Thank you for the feedback on this survey question, and we will note the below issues when interpreting the data.
The intention of the question was that a respondent not in favour of additional criteria would, by saying “no”, be relying on the existing framework in the form of the “reasonabless test”.
Please also feel free to send views to this inbox that would not otherwise by captured by the consultation.”
UNQUOTE
Insurance is being treated unnecessarily complicated. It isn’t.
It is just a product, no different to a packet of cornflakes for example.
The MA or freeholder approaches an insurer, gets a quote, accepts it or not, buys it. Job done.
Simplistic point of view maybe, but a lot of stuff is over thought.
MAs get paid handsomely already in fees, no more is required.
What is required is truth and transparency.
Mr. Lancefield,
I completely agree with you.
That product is a simple off the shelf purchase that is easily obtained by any qualified property managing agent and the time and effort to do so must already be included in the fee for professional services.
Can you imagine any property managing agent protesting that they do not include that cost in their fee to procure property insurance on behalf of their valued Client? In the real world any such firm would be held up to scorn and ridicule in my opinion?
Many of the very large freeholders sub contract the collection of ground rent to other firms, which also includes property managing agents in respect of property manintenance etc.
I must ask with regard to the above what does the Freeholder actually contribute if anything?
I
I am taking my case to the tribunal. Because, the Freeholders emailed me with the cost of the new Buildings Insurance premiums to cost 6.340.00 but when the MA sent out the service chzrge demand, the premiums would cost 18.920.00. The actual premium costs of 6.340.00 is 40 % less than the prtemiums we paid in 2016, 8 years earlier. That is the extend of their loading our insurance premiums ?
I am claiming a refund of 56 % of the last 8 years insutrance premiums we paid out with a deduction of 20 % for contingencies ie Dealing with Claims . Although, MA s contract suggests, their annual fee includes claims handling too.
Anyone like to comment if I can win the Tribunal or not ?
Q19 is telling in that it focuses on ‘the removal of the ability to share commission’. As opposed to, say: ‘the removal of the ability to share the workload associated with the payment of commissions’.
If commissions were reimbursement for work carried out then presumably that work would transfer to the broker. But of course it isn’t – it’s a secret commission, effectively a kickback for placing the policy with the insurer. Nothing to do with who is doing what in the ‘oh so complex, so arduous, such hard work’ task of placing insurance…
And how it will impact the broker is if they don’t have the kickback carrot to offer the freeholder/landlord then their job winning work might be that bit more difficult (& their commission may rise, but overall net result must surely be a reduction in overall premiums).
Shouldn`t of LKP got this discussion out earlier rather than 3 days to go before the consultation?