Leaseholder buildings insurance

If you’re a leaseholder, you might need buildings insurance. Read on to learn about leasehold insurance, what it covers and how to manage your rights and responsibilities.

eve powell
Eve Powell
Updated 18 January 2022  | 3 min read

What’s leasehold insurance?

Leasehold insurance is buildings insurance for people who own a leasehold property. It helps to make sure your investment in the property is protected if something happens to the building.

This insurance covers the cost of repairing any structural damage and it will also cover the full cost of rebuilding your home, should the worst happen.

As a leaseholder, having this type of insurance in place helps to cover the cost if you’re presented with a large service charge bill to pay for repairs to your building.

Do leaseholders need building insurance?

Taking out buildings insurance isn’t compulsory, but it might be a condition of your mortgage that you have a policy in place. The responsibilities also differ depending on whether you own a leasehold flat or house:

If you own a leasehold flat

When you’re a leaseholder of a flat your lease might stipulate that you have buildings insurance in place, although it’s typically something that the freeholder arranges.

If the freeholder is responsible for the buildings insurance, you’ll usually find a cost for this is included in your service charge.

It’s a good idea to check your lease, as this should explain how your property’s insured. You can also ask for a copy of the insurance policy so that you can see what’s covered.

If the freeholder isn’t responsible for the insurance, or if you share the freehold with other leaseholders, it’s best for all leaseholders to buy a policy together - this will make sure the whole building has the same level of cover.

If you own a leasehold house

Owning a leasehold house isn’t as common as being a flat leaseholder, but you’ll still need to make sure that you’ve got buildings insurance in place.

In this instance, the responsibility for taking out cover will usually lie with you, but again check your lease to make sure.

If you’re in any doubt, it’s always best to take out cover that you can cancel at a later date, rather than leaving yourself uninsured.

What does buildings insurance cover?

Buildings insurance covers the cost of repairing damage to the structure of your building as well as its permanent fixtures and fittings.

Most policies will protect your home against damage by:

  • Frozen or burst pipes
  • Fire and explosions
  • Floods and storms
  • Subsidence
  • Falling trees
  • Malicious damage

Because most leasehold properties are flats, your buildings insurance policy will usually cover communal areas, like hallways and landings, as well as any garden or outside area.

How much does building insurance cost?

This will vary depending on whether you’re insuring a house or a block of flats. And whether you’re paying for it directly or as part of your service charge.

The cost will also depend on other factors, like the area where you live and the size and rebuild value of the building.

To get the best deal and the right level of cover, it’s a good idea to shop around to compare policies and providers. You should also check the exclusions to understand what situations you won’t be covered for.

How do I get a quote?

Getting quotes for leasehold insurance is quick and easy, and comparing can save you money. To get you the most accurate quotes, we’ll need to know about:

  1. Your property

    Including whether it’s a leasehold flat or house, its size, age and where its located

  2. The rebuild cost of your property

    This is how much it would cost to rebuild your property from scratch, not its market value

  3. Previous claims

    You’ll need to tell us about any claims you’ve made on your home insurance in the last five years

  4. Security features

    If your property has smoke alarms, burglar alarms and other security features this may reduce the cost of your premium

  5. How close you live to water

    If you live in a flood-risk area you may need to give your insurer more information

I received a demand for a share of the buildings insurance. Do I have to pay?

Firstly, you’ll need to check the terms of your lease. This should tell you who’s responsible for insuring the building and what the cover should include.

It’ll also set out how the insurance costs will be covered. Usually, the landlord or freeholder is responsible for the insurance and the cost for this is included as part of the service charge.

If this is the case, you’ll be expected to pay this cost and could face legal action if you don’t.

What do I do if the freeholder is charging me too much for buildings insurance?

If your buildings insurance charge has gone up and you think you’re paying too much, you can ask your property managing agent to explain the increase.

It might be that a review from the insurer has caused this - for example, if it’s discovered that the cladding on your building is potentially combustible.

You can also ask to see a copy of the insurance policy and the associated costs and documents. This will show how much the building’s insured for and who with, which risks are covered, and if your freeholder’s receiving any commission. The agent should respond to this request within 21 days and could face a £2,500 fine if they don’t.

If all else fails, you can have the matter decided in a magistrate’s court. If you can show you’re being charged excessively you can ask for the insurance costs to be reduced.

You may also be able to complain to the Financial Ombudsman Service about the property managing agent.

What other insurance do I need as a leaseholder?

As well as having buildings insurance in place, it’s also wise to take out contents insurance. It isn’t a legal requirement, but it’ll help to cover the cost of replacing your possessions if there was an event like a fire, flood or burglary.

I have an absent landlord, who insures my property?

If you can prove you’ve taken all reasonable measures to find and contact the landlord, it’s possible you can take this responsibility on yourself and let the insurer know the situation.

If the landlord goes missing, this normally means they’re in breach of their obligation to repair and maintain the building. In this case, you can apply to the courts for a vesting order but it’s likely you’ll need some legal advice.

The vesting order will help to give you the option of either buying the freehold (together with other long leaseholders) or allowing you to claim the Right to Manage so that you can take over the management and upkeep of the building, including responsibility for its insurance, with the other leaseholders.

What other obligations do I have as a leaseholder?

When you’re a leaseholder, you’ll also be responsible for paying any ground rent charges and contributing to the costs of maintenance and upkeep.

The service charges from the freeholder will include maintenance and repairs, looking after common areas and buildings insurance, as well as the costs of any professional management agent involved.

The specific rights and responsibilities for your property will be set out in your lease. These usually include keeping your property in good order, not making structural alterations, and making your payments on time.

What’s the difference between a leaseholder and a freeholder?

If you’re a freeholder, you own the property and the land it stands on. This means you’re responsible for everything related to looking after your property, from the contents inside to the exterior walls and roof.

If you’re a leaseholder, you’ll own the property, but not the land it’s built on - this is owned by the freeholder. You’ll normally have the lease for a set amount of time which will usually be for 99 years or more.

During your lease, the freeholder can charge you ground rent and service charges for managing and maintaining the property - which includes the exterior walls and roof, as well as any common areas.

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