Leasehold 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.

If you decided to buy the freehold to your home, whether on your own or by clubbing together with other residents, you’ll be responsible for buying buildings insurance.

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.

Buildings insurance for flats with a leasehold isn’t a legal requirement, but your mortgage lender will almost certainly insist on it. They’ll probably ask to see your leasehold flat insurance documents to make sure the property is covered.

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.

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.

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 they don’t, 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. At a tribunal, 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.

You’ll typically have to pay:

Service charge

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.

Ground rent

This is a fee you pay to your freeholder as a condition of the lease for the land your home is on.

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.

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 has been illegal to charge ground rent on new residential long leases (lease agreements 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.

Anyone found charging ground rent fees in violation of the rules of the Leasehold Reform Act could face fines of up to £30,000.

Along with buildings insurance, you might want to think about home contents insurance. This can cover the cost of replacing the belongings in your home if they’re destroyed, damaged or stolen.

 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.

If your property suffers structural damage because of an incident in an adjoining flat, buildings insurance should cover you for the repairs to the structure of the building 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.