QUESTION
We will be grateful if you could help us to deal with the insurance problem with our landlord.
We are a block of 183 flats. Recently we heard from our landlord that the lease states that the landlord is responsible for insuring the building with the insurance company and the broker of their choice.
We have now come to learn that at least the broker share the same building as the landlord and we think that the landlord owns the broker firm anyway.
Coming to the point, the premium offered to us, the leaseholders, is as much as three times higher than what is offered in the market.
We are thinking that we manage the block of flats anyway and we could manage the insurance ourselves.
What, if anything, can we do to change the condition on the lease and allow us to insure this property ourselves? Your help and support will be greatly appreciated.
ANSWER
Your problem is by no means uncommon. Insurance premiums have for some years been a fertile area of disputes between landlords and tenants.
I am assuming from your letter that the management of the building is dealt with by a management company controlled by the residents with the freeholder insuring in accordance with the terms of the lease.
The legal position is that the landlord is not under an obligation to secure the cheapest cover, provided that the cover in place is obtained in the usual course of business and from a reputable insurer then the landlord will have complied with his obligations. However if the sum insured or premium is high then the landlord may not have fulfilled its obligations and may be challenged.
I would advise that you obtain alternative quotations on a like for like basis and obtain specialist advice on the level of cover. You will need a copy of the claims record. Once you have this submit it to the landlord and invite his comments if it is much cheaper than his cover .If you are still not satisfied ,an FTT will have jurisdiction to determine a dispute.
You are also inferring that there may be a relationship between landlord and broker, which leads us to the question of commission. Enquire whether the landlord is receiving any commission and whether he is carrying out any brokerage functions as ,if not, he may have to account for any commission received.
Finally even though you already manage the block, you could consider going right to manage (you need more than 50% of lessees) as insurance rights in a lease will pass to a right to manage company as of right.
Richard Sandler, Director and Lawyer/Manager PDC Law
