Buildings Insurance

Buildings insurance is a legal requirement and is a condition of taking out a mortgage. It covers the structure of the building and the common parts that the leaseholders do not own individually, such as the roof, foundations, load bearing walls, gardens, landings, and stairways. It can also cover other permanent fixtures outside, such as gates, fences, drives and swimming pools as well as fixtures within the property such as shower trays and baths. The policy should however be checked as the latter is rather a grey area.  A sample of other types of insurance that can be covered by buildings insurance are:

1. Contents of Communal Areas
   For example communal carpets
2. Trace & Access Cover
   This is important because investigating the cause of a leak for example may involve stripping a kitchen to find and then repair a pipe.
3. Accidental Damage to Underground Services and Cables
   This insures gas, electricity, oil or water, as well as sewage pipes, against accidental damage. They are not insured against wear and tear.
4. Emergency Repairs
   Many policies cover the cost of temporary work.
5. Legal Expenses
   It is important to note that if this type of policy is issued solely in the name of the freeholder than this may not defend the management company.

Note: Although not mentioned in the CML handbook, a solicitor should also insist on seeing a copy of each flat owner's insurance to ensure that it both exists and is sufficient. If copies cannot be supplied then a solicitor should insist on contingent buildings indemnity insurance.

Responsibility to Insure: Leaseholders

Where the lease requires that the responsibility to insure the building falls to the leaseholders, the lease must contain an enforceable 'covenant to insure' (promise) by the landlord or management company that will enable them to act against any other leaseholders that don't pay. The problem with this however is that the covenant usually requires any leaseholder that wants it enforced is required to pay for any costs incurred by the landlord or agent in taking any action.

Responsibility To Insure: Managing Agent

If the lease requires the managing agent to insure the building and maintain the common areas then the agent must be granted a legal right to enter the property, either by way of a lease of the common parts or the company being made up of the leaseholders of the building as in the case of an RMC/RTM company. If it is not then the lease should contain a covenant by the landlord to take over the management company's responsibilities in the event that it fails.

It is also important to note that if the managing agent arranges the insurance they may need to be regulated by the FSA depending on whether what they do meets the definition of a 'regulated activity'.

If the lease was granted before 1st September 2000 and does not meet these requirements but the conveyancer is nonetheless satisfied that the arrangements which are in place are sufficient then the lender will be happy to proceed provided that the conveyancer is prepared to give a clear certificate of title.