Building Insurance

Leasehold Property - FAQ

      The lease is an interest in land granted by a freehold owner or by a landlord who has a lease and wishes to grant a sublease of shorter duration that his own lease     

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Who insures the building?

Lender's insurance requirments

What is covered by the policy?

 

Who insures the building?

This is important and there are several ways in which this may be covered in the lease. Your solicitor will tell you about the insurance provisions, which are applicable to the property you intend to purchase. It is usual for the freehold owner to insure the structure of the building its boundaries and grounds and any central services such as boilers and drains. It is important that the value covered will be sufficient to enable any damage by insured perils to be reinstated. The landlord’s policy will usually cover standard risks but should be inspected for exclusions, disclaimers and conditions as well as an excess. The interest of the tenant and lenders should be noted so as to give protection under the policy.

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Lender’s insurance requirements

Your solicitor will report on the property’s individual insurance arrangements to your Lender who may insist on approving the general insurance arrangements, the amount and type of cover and the insurance company. If the lease does not provide for insurance monies to be laid out in the replacement or rebuilding of the building and does not oblige the Landlord to insure the building for the full reinstatement value, satisfactory arrangements must be made.

Where the tenant is required to insure your Lender may require you to add the property to the Lender’s block arrangements. We will be concerned to establish that all parts of the building are covered.

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What is covered by the Policy?

The scope of the insurance should be carefully analysed to establish precisely what is covered e.g. the roof, foundations, boundaries and common parts. In blocks of flats, equipment (lifts, boilers, etc.) must also be considered. You will need to check that the list of risks covered is satisfactory as will any Lender.

Having considered what is covered and the risks included, the value of the cover will need to be established. Certain lenders insist that a flat is covered for a minimum rebuilding figure. If the current insurance does not insure the flat for the amount advised by your Lender or your surveyor, arrangements can be made to increase the cover to the amount required. You will need advice from a suitable expert on the appropriate figure.

Excluded risks may need to be covered separately along with personal possessions and fixtures, which are classified as “contents”. The disclaimer and excess on the policy will also need to be noted. Building insurance policies do not include cover for any contents. It is therefore essential that you arrange appropriate cover to take effect as soon as you move into the flat.

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