Leasehold buildings insurance
If you own a leasehold property, you lease your home from the owner of the land – called the freeholder – for a set period of time, normally on a long-term basis. To make sure you’re covered for repairs to any damage to the bricks and mortar of your home, it’s important to ensure you or the freeholder has buildings insurance in place.
Who’s responsible for leasehold buildings insurance?
If you own a leasehold flat, you may find that your freeholder has already taken care of buildings insurance for the property. Many freeholders buy buildings insurance themselves, then charge leaseholders a share of the cost through their service charge.
But there’s no guarantee that your freeholder has arranged buildings insurance, so you’ll need to check the lease or have your solicitor check on your behalf. If the freeholder hasn’t arranged cover, you’ll need to get your own buildings insurance.
If there are multiple flats in the building, you might find it’s easier (and possibly cheaper) to club together with the other leaseholders and buy a policy. Plus, it will ensure that the whole building is insured and has the same level of cover.
What is and isn’t covered by buildings insurance?
Buildings insurance covers the cost of repairing or rebuilding your home if it’s damaged by:
- Storms, floods, fire and explosion
- Vandalism and theft
- Fallen trees and lamp posts
- Frozen or burst pipes.
Most leasehold properties are flats so, as well as your flat, buildings insurance should cover parts of the property that you don’t own – such as the other flats, the communal areas and any communal gardens.
Each policy will have its own exclusions but, typically, you won’t be covered for:
Pest infestations, poor workmanship and even frost damage might not be included either.
Want to know exactly what your policy covers? If you’re a leaseholder, you have a right to ask the freeholder if you can see the buildings insurance policy.
Leasehold insurance common issues
Here are some points to consider when arranging buildings insurance for your leasehold home:
- You may need buildings insurance to secure a mortgage: some mortgage lenders will require you to provide proof of buildings insurance as one of the conditions of their mortgage offer. Even if it’s not required, structural problems can be extremely expensive to repair so it’s vital to make sure you’re covered.
- Sharing a building with other leaseholders means a greater chance of incidents: you might be a careful homeowner, but that doesn’t mean your neighbours are too. Having leasehold buildings insurance in place, and encouraging your neighbours to do the same, could give you peace of mind that you’ll be covered if next door accidentally puts something metal in the microwave after a long night shift and starts a fire.
- Paying a proportion of buildings insurance for the freehold may be included in your leasehold contract: if it is, you’re legally required to pay your fair share or you could be found in breach of contract.
- If your freeholder is charging you over the odds for buildings insurance, you have rights. If you’re concerned about overpaying, ask to see a copy of the building’s insurance policy. Once you submit a formal written request, the freeholder must show you the policy documents within 21 days or face a fine.
If you’re unhappy with the amount you’re paying, you could discuss finding a cheaper deal with the freeholder or property management company. Your request could have more weight if you can coordinate with other leaseholders in the property to state your case. If you can’t come to an agreement through negotiation, you could take your case to an independent tribunal.
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Frequently asked questions
How do I know who is responsible for buildings insurance?
Your lease should clearly state who’s responsible for arranging buildings insurance cover and what that cover should include.
The freeholder is usually responsible for buildings insurance, which is typically included as part of the service charge. Your lease will explain how the service charge is organised and what you’ll have to pay.
What if I’ve bought the freehold of my leasehold property?
If you’ve bought the freehold, whether on your own or by clubbing together with other residents, you’ll be responsible for buying buildings insurance.
Read our guide to buying the freehold to your home.
What if I own a leasehold house?
Leasehold houses are uncommon, but if you own one, you’ll usually be responsible for getting buildings insurance. Check the terms of your lease to be sure.
Do I have to have buildings insurance for my leasehold property?
Buildings insurance isn’t a legal requirement, but your mortgage lender will almost certainly insist on it. They’ll probably ask to see the insurance documents to make sure the property is covered.
What to know if you have to buy leasehold buildings insurance
If you find that you’re responsible for arranging buildings insurance for your flat – either because the landlord hasn’t done so or because you’ve bought a share of the freehold – here’s what you need to know.
- It makes sense to buy buildings insurance with the other residents – that way, there won’t be problems with some parts of the building being covered and some not.
- If you want cover for a block of flats, you might need a valuation survey carried out before you buy buildings insurance.
- If you’re a joint freeholder of a building with flats, you’ll need to make sure your insurance covers the communal areas. The policy should also include liability cover in case someone is injured when they visit the building. And if you and the other freeholders employ anyone to maintain the building – a cleaner, for example – it should include employers’ liability cover.
- You need to make sure you have cover for the rebuild cost of the building, not its market value. Read our guide on how to calculate the rebuild cost of your home.
I’ve received a demand for my share of leasehold buildings insurance. Do I have to pay it?
If buildings insurance is included as part of your service charge, you’ll be expected to pay it. Paying a proportion of the freehold’s buildings insurance may be a condition of your leasehold contract, in which case you’ll be legally obligated to pay.
I think the freeholder is charging me too much for insurance. What are my rights?
If you think you’re being charged over the odds for your buildings insurance, you’re within your rights to ask your freeholder for a copy of the insurance policy. The copy must show how much the building is insured for, the name of the insurance provider and the risks that are covered by the policy.
The freeholder must reply to your written request for a summary of the policy within 21 days – if not, they’re committing an offence and could be fined up to £2,500.
If you’re not happy with the cover and the freeholder isn’t prepared to negotiate, you could choose to take them to a housing tribunal, where an independent judge will decide the outcome.
It might be worth discussing the matter with other leaseholders in the building, as the freeholder may be more readily persuaded by you all acting together.
Where can I get leasehold buildings insurance?
The best way to get the right policy for your needs is to shop around. To compare with us, you just need to provide a few details about yourself and your home, and we’ll find you a range of quotes from UK insurance providers in a matter of minutes.
What other leasehold charges will I need to pay?
You’ll typically have to pay:
Usually paid monthly, your service charge is designed to cover repairs to the shared areas of the building, any maintenance and improvements, as well as, in some cases, your proportion of the buildings insurance. Your lease will set out exactly how the service charge is organised and should include a breakdown of what you’ll be charged for.
If your building boasts many extra features, such as lifts, a gym or a 24-hour concierge, you’re likely to pay a higher service charge.
If you’re worried that your service charge is too expensive, you’re perfectly within your rights to ask to see how it’s worked out and spent. You can also ask for receipts.
The freeholder is legally obliged to give you this information – it’s actually a criminal offence if they don’t.
This is a fee you pay to your freeholder as a condition of the lease for the land your home is on. Typically, ground rent could be up to around £320 a year, but it could be more (or less) depending on the terms of your lease.
Once you get the demand for ground rent, you must pay it, otherwise your freeholder could take legal action against you.
Luckily for those on the market for a leasehold property, the Leasehold Reform (Ground Rent) Act 2022 will come into force in June 2022 and effectively abolish ground rent on all new residential lease agreements of more than 21 years.
Reverse or sinking fund
You might need to pay into a reverse or sinking fund as part of your lease. This allows the freeholder to build up a fund to cover the cost of unexpected or expensive repairs, like replacing the lift.
If you move out, you won’t usually be able to get back the money you’ve put in – but check the terms of your lease to be sure.
How does the Leasehold Reform Act 2022 effect my leasehold property?
The Leasehold Reform Act is the first step in the UK Government’s aim to make leasehold property a fairer and more affordable deal for leaseholders. The act means that from June 2022 it will be illegal to charge ground rent on new residential long leases (leases of more than 21 years) in England and Wales.
As it stands, the act won’t affect existing leases, although they may be addressed in future reforms. Freehold owners who choose to regrant, renegotiate or extend an existing lease should be very careful to comply with new regulations, as anyone found charging ground rent fees in violation of the rules of the Leasehold Reform Act could face fines of up to £30,000.
What other insurance do I need as a leaseholder?
If you need to buy both, you may find it cheaper to combine your buildings and contents insurance under one policy. It might also make it easier if you need to make a claim.
Will insurance cover a water leak from the upstairs flat?
If your property is damaged because of an incident in an adjoining flat, such as a burst pipe or a fire originating in your neighbour’s flat, buildings insurance should cover you for the repairs to the structure and any permanent fixtures or fittings. You’ll need to claim for any damage to your furniture or other possessions on your home contents policy.
If you pay your buildings insurance through a service fee, either to the freehold owner or a property management company, you may need to contact them to get the claim process started.
What do I need to get a quote?
To get a leasehold buildings insurance quote, we’ll need to know some basic information about your home, such as:
- When it was built
- How many rooms it has
- The rebuild cost.
To help you work out the rebuild cost of your home, there’s a calculator you can use when you compare with us.
What our expert says...
“If you haven’t already, it’s worth checking the details of your lease to see if you’re responsible for contributions towards maintaining the communal areas of the building. You’ll need to set up payments for this if you haven’t done so already.”
- Chris King, Home insurance expert