When you’re considering buying or leasing a flat, common questions that often come up are “Who pays for the building insurance for a flat?” and “Do I need buildings insurance for a flat?”. In this guide, Lansdown Insurance Brokers answer some of these questions and clarify who bears the responsibility for this crucial insurance and what this means for leaseholders and tenants.
This guide is part of our “Who is responsible for buildings insurance for a block of flats?” series. You can read the other guides in the series and view a simple at a glance visual guide here.
When it comes to insurance for blocks of flats, there are usually several key figures involved. These include:
- The Freeholder – The ultimate owner of the building and the land it sits on.
- Leaseholders – Owners of the leasehold flats within the building. Has the right to live there for a set period (as defined in the lease agreement). Does not own the building itself.
- Landlords – Rent out a flat they own (which they likely hold as a leasehold) to tenants.
- Tenants – Rent a flat in the block from a landlord.
Who is responsible for buildings insurance on a leasehold flat?
Typically, the freeholder is ultimately responsible for arranging the buildings insurance for a block of flats. This cover would provide the buildings insurance for the leasehold flat. The freeholder takes out the policy and pays the premiums.
You can read more about freeholders and their insurance responsibilities in our related blog here.
Residents Management Companies (RMCs)
In some cases, leaseholders may be part of an RMC. This is a company formed by leaseholders to manage the building, including arranging buildings insurance. If leaseholders don’t want to set-up a limited company, they can establish a Right To Manage, effectively a separate entity (but not a limited company) that handles building management and insurance.
Do leaseholders need buildings insurance?
In most cases leaseholders of flats won’t need buildings insurance as this is the freeholder will need to arrange this.
To get a clear picture of your specific responsibilities regarding building insurance, it’s essential to review your individual leasehold agreement. This will outline the terms and conditions related to building insurance and any obligations you may have as a leaseholder.
Who pays for buildings insurance on a leasehold flat?
While the freeholder is responsible for arranging and paying for the buildings insurance for the block of flats, the cost of this is then usually passed on to the leaseholders, via their service charge. Recent changes, detailed below, have aimed to make this process more transparent for leaseholders.
Is a block of flats insurance policy for tenants?
No. As a tenant, you’re generally not responsible for arranging building insurance, this is down to the freeholder to arrange. However, as it’s likely that your landlord will be paying a share of this insurance cost through their service charge, you may be indirectly contributing to the cost through your rent, as landlords often incorporate their building insurance costs into their rental charges.
What insurance do I need for a leasehold flat?
While the buildings insurance arranged by the freeholder covers the structure of the building, it doesn’t protect your personal belongings. That’s where contents insurance comes in. Both leaseholders and tenants should consider getting contents insurance to safeguard their furniture, electronics, and other valuables.
The importance of recent Multiple Occupancy Building Insurance changes
The Multiple Occupancy Building Insurance (MOBI) reforms that were recently introduced in the UK have aimed to improve transparency and fairness in the building insurance market for leaseholders. These changes include:
- Price per flat: Specialist insurance brokers like Lansdown Insurance Brokers can now provide a price per flat for building insurance. As well as offering a simple split of costs i.e. the costs evenly divided by the number of flats, a cost by flat size percentage can also be provided. This can be beneficial for leaseholders in blocks where flats are not all the same size, as it allows for a more equitable distribution of costs based on the size of each flat.
- Increased transparency: The MOBI changes have led to greater transparency in the building insurance market, allowing leaseholders to have a better understanding of the costs involved and the factors influencing the premiums.
Looking for specialist advice?
If you’re looking for expert advice and assistance with building insurance for a block of flats, Lansdown Insurance Brokers can help. With over 20 years of experience, we understand the challenges you face and work with leading insurers to find the right cover for your building and budget. Get in touch with our experienced team to find out more.