Can a leaseholder insure a single flat?
In the absence of a block policy from the landlord / freeholder, insurance for a single leasehold flat, in the leaseholders name is usually available and in some cases it is the right solution for the individual at that time. If you are buying a leasehold flat and the freeholder has not provided a copy of the building insurance policy, either because he simply hasn’t arranged a policy, he’s not interested in running the affairs of the block, has passed away, is insolvent, has left the country or just disappeared, then you usually have the option of buying a single policy, just for your flat, in your own name. The absent landlord / freeholder situation must be disclosed to the insurer at the time of requesting the quotation.
Buying a policy for a single leasehold flat will often satisfy your lender for the purposes of the mortgage but it is not an ideal solution. Ideally this should be seen as a temporary measure as it is very strongly recommended that a block flats policy is arranged covering all of the leaseholders for their respective rights and interests. Alternatively it is often prudent to obtain a the right to manage (RTM) and arrange insurance either in the individual names or in the name of a limited company set up to manage the flats. This will solve issues such as maintenance of the building as well. Taking legal advice as to how this is set up is important. For the purposes of providing finance, not all lenders will accept insurance for a single flat, insisting on a block policy or they won’t offer you finance, meaning you may need to look to other lenders.
Problems in insuring a single leasehold flat
In the event of an incident when a claim would need to be made, the situation can sometimes be complicated. Let’s use an example of two flats, a ground floor and a first floor. If a fire destroys both flats there are two insurers that need to arrange a loss adjuster (usually they will both instruct the same adjuster) and multiple numbers of people to liaise with and arrange repairs with which will undoubtedly cause delays.
If one of the flats was insured by the leaseholder and the other one wasn’t insured at all, there would be immediate complications. If the freeholder is absent and the leaseholder of the uninsured flat wasn’t in a position to fund the rebuilding of 50% of the building themselves, then you could find that neither flat could be rebuilt. A fire can affect the structural integrity of a property. It will very likely mean that whilst the insurance policy for the insured property could technically operate, it may not be able to fund repairs due to the repairs being impossible without both properties being repaired at the same time.
There is another issue with an absent freeholder / absent landlord situation and that comes down to maintenance of a property. Without somebody ‘taking charge’ of the maintenance of a property then essential maintenance may not take place. An insurance policy will not cover any loss caused by, or accentuated by the lack of maintenance so you can’t rely on the insurer paying for damage occurring due to the property for water damage as a result of blocked or leaking drains, rain entering the property as the ridge tiles have come loose etc.