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’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.

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 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.

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 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.

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.

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. 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.

Ground rent
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.

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.

Along with buildings insurance, you might want to think about 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 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.