A leasehold is a popular way to buy a flat in the UK. But some aspects of owning a leasehold flat, such as getting building insurance, are not always apparent. If you’re in the process of buying or already have a leasehold flat in the UK, do you need building insurance for it? The answer is that it depends on your freeholder.
In this blog, we’ll take a deeper look at how building insurance works, why it’s advantageous to have, and who’s responsible for it in the case of a leasehold flat.
What is building insurance?
Building insurance is a type of insurance policy that covers a building’s structure, such as the walls, roof, stairs, and floors.
Building insurance provides financial protection against any potential hazards or situations that may cause damage to the building. It doesn’t cover the contents of the building; a separate contents insurance policy is required for belongings.
A building insurance policy should cover the total cost of rebuilding the property. The cover should include fees for demolition, site clearance, and architects. It will also usually cover damage or loss caused by:
- Frozen and burst pipes
- Fire
- Storms
- Floods
- Explosions
- Fallen trees or other objects
- Subsidence
- Vehicle collisions
What is a leasehold flat?
A leasehold flat is a type of property ownership in which the buyer holds a long-term lease from the freeholder, usually a landlord, local authority, housing association, or property management company. The lease gives the leasehold owner the right to occupy the property for a specified period, typically between 99 and 125 years. The flat can be bought and sold during that term.
The freeholder owns the structure, any common areas of the building, and the land it is built on. They are typically responsible for the repair and maintenance of these parts of the building.
During this time, the leasehold owner is responsible for paying ground rent to the landlord. They are also responsible for any repair and maintenance of the property.
Unless the property is purchased outright or the lease is extended, the property will revert to the freeholder at the end of the lease period.
Leasehold flats are a common type of property ownership in the UK. They are usually found in blocks of flats, apartment buildings, and other multi-unit developments.
Do I need building insurance for a leasehold flat?
Individual leaseholders are not typically required to arrange building insurance for a leasehold flat. The freeholder can insure the entire development where the particular flat is located.
For this reason, building insurance is typically the responsibility of the freeholder. The cost of the building insurance may be included in the ground rent paid by the leaseholder to the freeholder or charged separately depending on the individual flat and circumstances.
This insurance will not usually cover the possessions of individual leaseholders. If you have a leasehold flat, you must take out contents insurance to protect your belongings.
In some cases, the lease may require that the leaseholder take out building insurance from a named insurer.
Advantages of having building insurance for a leasehold flat
If you own a leasehold flat, you might find that the freeholder has taken care of buildings insurance for the property. However, there is no guarantee of this. You should always check the lease or ask a solicitor to check on your behalf.
If the freeholder has not arranged for building insurance on the property, you will need to get your own.
In a multi-flat development, it may be easier and cheaper to collaborate with other leaseholders and purchase a policy together. Teaming up can be an ideal way to ensure that the entire building is insured with the same level of cover.
There are several advantages of having building insurance for a leasehold flat. These are as follows:
- Getting a mortgage: Most lenders will require that building insurance has been or is going to be taken out on the property before they agree to release the funds. In the case of a leasehold flat, the lender may require that building insurance is arranged by either the freeholder or the leaseholder.
- Damage cover: Getting insurance on a leasehold flat protects you financially should any damage occur. It could include damage due to fire, flooding, subsidence, burst pipes and more. Problems such as these can be costly to repair out of pocket.
There are also several benefits of being able to arrange your building insurance rather than relying on the freeholder. These include:
- Save money: Rather than paying an amount set by the freeholder based on their choice of insurer, leaseholders can shop around and find a better deal.
- More control: When arranging your buildings cover for a leasehold flat, you have more control about what’s included, such as optional extras or a buildings and contents insurance package.
- Work together: When leaseholders are responsible for their building insurance, they can benefit from teaming up with other leaseholders to get a policy.
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