Managing agent overcharging for Insurance - any comeback?
Discussion
I have a flat where we own the leasehold but not the freehold. The freeholder uses a managing agent to take care of all of their portfolio. The managing agent is a tied agent in terms of where they place their buildings insurance business.
To date, they have used Liverpool Victoria, who were always expensive, however 2 years ago, a c. £28k localised subsidence claim was settled (bay window sagged due to issues with drains below). The building (split into 3 flats), was then apportioned around £5,000 of the total annual buildings insurance cost renewal, i.e. around £1,700 per flat.
The freehold was sold earlier this year. The new freeholder has put the building on a standalone policy with Aviva (with declared claims history, etc) for an annual premium of £270 (c. £90 per flat)....
Do I have any redress against the previous managing agent on any grounds?
To date, they have used Liverpool Victoria, who were always expensive, however 2 years ago, a c. £28k localised subsidence claim was settled (bay window sagged due to issues with drains below). The building (split into 3 flats), was then apportioned around £5,000 of the total annual buildings insurance cost renewal, i.e. around £1,700 per flat.
The freehold was sold earlier this year. The new freeholder has put the building on a standalone policy with Aviva (with declared claims history, etc) for an annual premium of £270 (c. £90 per flat)....
Do I have any redress against the previous managing agent on any grounds?
fergus said:
The freehold was sold earlier this year. The new freeholder has put the building on a standalone policy with Aviva (with declared claims history, etc) for an annual premium of £270 (c. £90 per flat)....
Are you sure the previous claims history has been disclosed. £270 for annual insurance on a building with a recent £28K subsidence claim?Doesn't sound like a very shrewd piece of underwriting to me.
TwigtheWonderkid said:
fergus said:
The freehold was sold earlier this year. The new freeholder has put the building on a standalone policy with Aviva (with declared claims history, etc) for an annual premium of £270 (c. £90 per flat)....
Are you sure the previous claims history has been disclosed. £270 for annual insurance on a building with a recent £28K subsidence claim?Doesn't sound like a very shrewd piece of underwriting to me.
Get where your coming from though and do agree.....
surveyor said:
TwigtheWonderkid said:
fergus said:
The freehold was sold earlier this year. The new freeholder has put the building on a standalone policy with Aviva (with declared claims history, etc) for an annual premium of £270 (c. £90 per flat)....
Are you sure the previous claims history has been disclosed. £270 for annual insurance on a building with a recent £28K subsidence claim?Doesn't sound like a very shrewd piece of underwriting to me.
Get where your coming from though and do agree.....
As the new freeholder is able to pass on all costs to the lessees, I can't see the downside of them not disclosing the claim. If they haven't, I hope they have vicarious liability insurance in the event of a future subsidence claim being refused based upon non-disclosure. The agent did mention that subsidence cover tends to range from 20p-40p per £100 covered based upon the locality (typical ground conditions). The excess has also moved from £1k to £2.5k for subsidence related claims.
What is the bigger risk?
fergus said:
I have a flat where we own the leasehold but not the freehold. The freeholder uses a managing agent to take care of all of their portfolio. The managing agent is a tied agent in terms of where they place their buildings insurance business.
To date, they have used Liverpool Victoria, who were always expensive, however 2 years ago, a c. £28k localised subsidence claim was settled (bay window sagged due to issues with drains below). The building (split into 3 flats), was then apportioned around £5,000 of the total annual buildings insurance cost renewal, i.e. around £1,700 per flat.
The freehold was sold earlier this year. The new freeholder has put the building on a standalone policy with Aviva (with declared claims history, etc) for an annual premium of £270 (c. £90 per flat)....
Do I have any redress against the previous managing agent on any grounds?
Freeholders have a great scam on this. They have no obligation to provide you with the cheapest quote. I'm sure its a racket where the freeholders get a tidy kickback from the insurers. On my old flat, the buildings insurance was about £600 which was outrageous when I could get the same cover for about £100 from Tesco or some such. To date, they have used Liverpool Victoria, who were always expensive, however 2 years ago, a c. £28k localised subsidence claim was settled (bay window sagged due to issues with drains below). The building (split into 3 flats), was then apportioned around £5,000 of the total annual buildings insurance cost renewal, i.e. around £1,700 per flat.
The freehold was sold earlier this year. The new freeholder has put the building on a standalone policy with Aviva (with declared claims history, etc) for an annual premium of £270 (c. £90 per flat)....
Do I have any redress against the previous managing agent on any grounds?
E36GUY said:
Freeholders have a great scam on this. They have no obligation to provide you with the cheapest quote. I'm sure its a racket where the freeholders get a tidy kickback from the insurers. On my old flat, the buildings insurance was about £600 which was outrageous when I could get the same cover for about £100 from Tesco or some such.
Is there no duty of care, industry 'guidelines', standards, etc to prevent this happening?fergus said:
E36GUY said:
Freeholders have a great scam on this. They have no obligation to provide you with the cheapest quote. I'm sure its a racket where the freeholders get a tidy kickback from the insurers. On my old flat, the buildings insurance was about £600 which was outrageous when I could get the same cover for about £100 from Tesco or some such.
Is there no duty of care, industry 'guidelines', standards, etc to prevent this happening?happened to me, this is why i hopefull will NEVER go near another managed leasehold property. They will have been creaming money off you for years in various ways. Insurance is the favorite, normally with a commission coming back to them. The whole 'own a free hold scam the leaseholders' set up need regulating, but its not and as it is there aint much you can do.
The whole freehold vs leasehold thing is quite bizarre to me. I live in an area where 99% of the houses are leasehold. They are all on 999 year leases and the ground rent is usually a nominal amount. I think the most I've paid is £45 a year, the least £2.60. Plus I arrange all my own insurances. The freeholder does nothing at all and it doesn't bother me on every bit.
Your issue isn't with the freeholder necessarily, it's with whoever manages the lease and that tends to only be a problem on flats. Why not form your own management company and run it as a non-profit set up?
Your issue isn't with the freeholder necessarily, it's with whoever manages the lease and that tends to only be a problem on flats. Why not form your own management company and run it as a non-profit set up?
Gavia said:
Your issue isn't with the freeholder necessarily, it's with whoever manages the lease and that tends to only be a problem on flats. Why not form your own management company and run it as a non-profit set up?
I've done that with some of my flats, but this one particular flat has a few issues in the lease which means owning the freehold isn't to my advantage (other than ensuring I don't end up wearing outrageous building insurance premiums...)fergus said:
I've done that with some of my flats, but this one particular flat has a few issues in the lease which means owning the freehold isn't to my advantage (other than ensuring I don't end up wearing outrageous building insurance premiums...)
You're missing my point. You don't need to own the freehold to be the managing agent. They are two distinct aspects. My friend runs the management company for his gated community, but the freehold is still owned by someone else.
Gavia said:
fergus said:
I've done that with some of my flats, but this one particular flat has a few issues in the lease which means owning the freehold isn't to my advantage (other than ensuring I don't end up wearing outrageous building insurance premiums...)
You're missing my point. You don't need to own the freehold to be the managing agent. They are two distinct aspects. My friend runs the management company for his gated community, but the freehold is still owned by someone else.
fergus said:
Apologies, I was indeed. Given the only issue was with the rip off bldgs ins premium historically, I think the new freehold owners (also the managing agents in this instance) seem a lot more reasonable. Cheers
All good, seems like you've got a more reasonable set up now, but you should remember that you might want to try to take over the management yourselves. Share it with other occupiers and split the company ownership equally amongst all. It's very easy to do and maintain as long as all are reasonable occupiers / owners. Gavia said:
fergus said:
Apologies, I was indeed. Given the only issue was with the rip off bldgs ins premium historically, I think the new freehold owners (also the managing agents in this instance) seem a lot more reasonable. Cheers
All good, seems like you've got a more reasonable set up now, but you should remember that you might want to try to take over the management yourselves. Share it with other occupiers and split the company ownership equally amongst all. It's very easy to do and maintain as long as all are reasonable occupiers / owners. See Section 75 of the Commonhold and Leasehold Reform Act 2002.
http://www.legislation.gov.uk/ukpga/2002/15/sectio...
See Section 76 for the definition of a long lease.
Tenant is this context means the leaseholder who may not be the current occupier.
This can be a particular issue where many of the flats are owned by b-t-l landlords.
Many occupiers are on ASTs and therefore sub-tenants who have no such right.
Furthermore to form a RTM company you have have a minimum of 50% of the qualifying tenants as members.
See Section 79 of the Act.
Having looked into RTM on a large development it can be a right PITA.
Getting a bunch of different absentee landlord leaseholders on board isn't a walk in the park.
It needs sufficient support from qualifying tenants who actually live there and care enough to act.
If the RTM appoints a managing agent it requires the RTM directors to hold it to account.
Otherwise you risk simply replacing freeholder extortion with one exercised by the RTM directors.
Red Devil said:
The right to manage is only available to qualifying tenants on a long lease.
See Section 75 of the Commonhold and Leasehold Reform Act 2002.
http://www.legislation.gov.uk/ukpga/2002/15/sectio...
See Section 76 for the definition of a long lease.
Tenant is this context means the leaseholder who may not be the current occupier.
This can be a particular issue where many of the flats are owned by b-t-l landlords.
Many occupiers are on ASTs and therefore sub-tenants who have no such right.
Furthermore to form a RTM company you have have a minimum of 50% of the qualifying tenants as members.
See Section 79 of the Act.
Having looked into RTM on a large development it can be a right PITA.
Getting a bunch of different absentee landlord leaseholders on board isn't a walk in the park.
It needs sufficient support from qualifying tenants who actually live there and care enough to act.
If the RTM appoints a managing agent it requires the RTM directors to hold it to account.
Otherwise you risk simply replacing freeholder extortion with one exercised by the RTM directors.
Not everything in life relies upon legislation being in place to compel it. Many residents (used to avoid another indepth discussion) manage it successfully and without relying on the lawSee Section 75 of the Commonhold and Leasehold Reform Act 2002.
http://www.legislation.gov.uk/ukpga/2002/15/sectio...
See Section 76 for the definition of a long lease.
Tenant is this context means the leaseholder who may not be the current occupier.
This can be a particular issue where many of the flats are owned by b-t-l landlords.
Many occupiers are on ASTs and therefore sub-tenants who have no such right.
Furthermore to form a RTM company you have have a minimum of 50% of the qualifying tenants as members.
See Section 79 of the Act.
Having looked into RTM on a large development it can be a right PITA.
Getting a bunch of different absentee landlord leaseholders on board isn't a walk in the park.
It needs sufficient support from qualifying tenants who actually live there and care enough to act.
If the RTM appoints a managing agent it requires the RTM directors to hold it to account.
Otherwise you risk simply replacing freeholder extortion with one exercised by the RTM directors.
They must be incredibly small flats as £270 premium to cover three flats would suggest a building sum insured of under £150k.
The agent told you the rate for subsidence is between 0.20 and 0.40 eg £200 per £100k and £400k per £100k and you're paying a premium of £270 for all three flats. Have you looked at the Schedule?
The normal rate for a residential block of flats in an average rated area is generally circa 0.16% eg £160 per £100k
Bear in mind that some mortgage lenders won't accept a subsidence excess over £1000 for mortgage loans so it may impact you when you sell the property.
You will also have a number of questions from the buyers solicitors when they discover the previous subsidence / excess to ensure the new Insurer is aware of the subsidence
The agent told you the rate for subsidence is between 0.20 and 0.40 eg £200 per £100k and £400k per £100k and you're paying a premium of £270 for all three flats. Have you looked at the Schedule?
The normal rate for a residential block of flats in an average rated area is generally circa 0.16% eg £160 per £100k
Bear in mind that some mortgage lenders won't accept a subsidence excess over £1000 for mortgage loans so it may impact you when you sell the property.
You will also have a number of questions from the buyers solicitors when they discover the previous subsidence / excess to ensure the new Insurer is aware of the subsidence
fergus said:
Is there no duty of care, industry 'guidelines', standards, etc to prevent this happening?
The leasehold management business is worth in the UK approximately £20billion, there are presently no regulations or licensing required to start up as a property management company, so any person, what ever their past history can be holding, handling £000000s of leaseholder’s monies. As a Leaseholder I caught a Property Management Company (hereafter PMC) doing exactly the same thing, taking a large kick back, commission from hiking up our block's building insurance premium, in fact I even caught one company cancelling policies in mid term, and banking the refund premium in their own personal bank account.
Another PMC owned their own insurance brokers, so had two bites of the cake, and also their own builders, gardeners etc. etc., and when ever contractors were asked to quote for repairs etc., surprise, surprise the PMC's companies were always the cheapest, and by chance always the last to quote.
Charges should always be reasonable, clear and transparent, and if not then there is case to pursue against the PMC, possibly through the First Tier of the Tribunal Service (Property).
A Leaseholder has the right to ask under The Landlord and Tenants Act 1985, for the past and present building insurance certificate for the block.
These two links below may assist you, the first search might produce more info on the company, directors, other companies, other clients/leasehold blocks (power in numbers). The second link is to the Leasehold Advisory Service, the same according one free telephone legal advice. Good luck.
https://www.duedil.com
http://www.lease-advice.org/
dacouch said:
They must be incredibly small flats as £270 premium to cover three flats would suggest a building sum insured of under £150k.
The agent told you the rate for subsidence is between 0.20 and 0.40 eg £200 per £100k and £400k per £100k and you're paying a premium of £270 for all three flats. Have you looked at the Schedule?
The normal rate for a residential block of flats in an average rated area is generally circa 0.16% eg £160 per £100k
Bear in mind that some mortgage lenders won't accept a subsidence excess over £1000 for mortgage loans so it may impact you when you sell the property.
You will also have a number of questions from the buyers solicitors when they discover the previous subsidence / excess to ensure the new Insurer is aware of the subsidence
thanks for the info.The agent told you the rate for subsidence is between 0.20 and 0.40 eg £200 per £100k and £400k per £100k and you're paying a premium of £270 for all three flats. Have you looked at the Schedule?
The normal rate for a residential block of flats in an average rated area is generally circa 0.16% eg £160 per £100k
Bear in mind that some mortgage lenders won't accept a subsidence excess over £1000 for mortgage loans so it may impact you when you sell the property.
You will also have a number of questions from the buyers solicitors when they discover the previous subsidence / excess to ensure the new Insurer is aware of the subsidence
I've not yet seen the schedule, however, the previous schedule was for £640k build cost with a 30% day one uplift, plus loss of rent, alternative accom, etc.
ps the current agent has hundreds of freeholds so may have negotiated good terms? u/w is Aviva.
fergus said:
thanks for the info.
I've not yet seen the schedule, however, the previous schedule was for £640k build cost with a 30% day one uplift, plus loss of rent, alternative accom, etc.
ps the current agent has hundreds of freeholds so may have negotiated good terms? u/w is Aviva.
Taking into account building cost inflation at say 4% the next year's sum insured would be circa £660k even at a rate of 0.1% the premium would be £660 + the Insurance Tax. At a rate of 0.5% would be £330 plus the Tax.I've not yet seen the schedule, however, the previous schedule was for £640k build cost with a 30% day one uplift, plus loss of rent, alternative accom, etc.
ps the current agent has hundreds of freeholds so may have negotiated good terms? u/w is Aviva.
A rate of 0.5% would be very low in my experience, out of that rate Aviva would need to pay the broker between 20% and 40% commision. There is also no real motivation for the agent to come up with a premium so low as it would be massively lower than the going rate.
I strongly recommend you check the schedule to check you have enough cover, apart from the problems under insurance causes if you make a claim, even if you ultimately have recourse against the agent it would be a very messy claim and then court case. You also would have the issue of when one of you sells their flat, the buyer's solicitor will often want to check the building sum insured is correct. They tend to do this around exchange date. If they pick up the sum insured is not correct it can cause delays whilst it's resolved.
P.S "100s of freeholds paying premiums of £400 is not that big a client for an Insurer, even at 500 free holds it's only £200k of premium including Tax and the brokers commission. I have commercial property agents who pay me more than that in premium a year for 50 properties.
Gavia said:
Not everything in life relies upon legislation being in place to compel it.
Maybe so, but that is irrelevant in this context.Gavia said:
Many residents (used to avoid another indepth discussion) manage it successfully and without relying on the law
I have no idea what you're on about. The law is germane to getting to that stage.Changing the word occupier to resident to support your contention doesn't cut it btw. That is not determinant of their status.
No ifs or buts. They can only exercise a RTM if they are a tenant on a long lease which in real terms means being the leaseholder.
http://www.lease-advice.org.uk/documents/Right_to_...
The qualifying conditions must be satisfied in order for a notice to be served on the freeholder to force a transfer.
Are you seriously suggesting a freeholder would voluntarily give up their rights just because I, as one individual, wanted them to?
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