Freeholder arranged insurance

Does the Freeholder of a block of flats have the choice of purchasing insurance from any supplier or do they have to tender and act fairly and reasonably to keep costs down for the lessees?

(Note this is for a friend).

Transpires that the owners of the freeholding company also own the insurance firm! The prices are inevitably high.

The actual management company are part of a redress scheme which stipulates that there “cannot be a conflict of interest” with suppliers etc.

They do not tender for competitive quotes.

Over a barrel scenario?

They have to act professionally. I assume that there must be a similar process to s20 repairs where they have to get a number of quotes, but I don’t know enough about long leasehold law to comment further. Book a call with the Leasehold Advisory Service to check how you can tackle it.

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Freeholder must be able to demonstrate that this is the most appropriate cover for your building and that the price is competitive. No comparative quotes and a consistent behaviour in not obtaining them makes it a financial crime. If they are handling client money (ie. leaseholders’ service charges) they will need to be registered with the FCA. Report to them.


It will depend what the lease says, but. Our leases state that the freeholder may select the insurer, it does NOT say that they can place the insurance, their managing agent ‘front’ company does place it with a broker who described them, when I rang them up, as a client and NOT their actual relationship which is an FCA regulated ‘appointed representative’, in other words the management company ‘introduces’ the freeholder and takes a commission, I would guess about £35000 and inflated by the ongoing fire safety work.

I raised this at an AGM of our right to manage company and our own appointed, their reaction was to a) recognise my point and b) allude to their doing the same when actung in that role, covert commissions are I think contrary to FCA regulations, it’s a disgrace.

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The FCA have changed the rules on commission back to the freeholder and agents and there are also new rules requiring insurers and brokers to disclose to lease holders the full details (previously they could say you were not their client)

To me the obscenity is that brokers typically take 25 - 30% ( can be as high as 60%) for sending a few emails, but you can’t go direct to the underwriter and cut out the middle man.

The FCA should allow the price comparison sites to get involved which is the only way to drive competition.

Until then, get some facts… How many flats, what is the total policy price and then compare that to other buildings

For £100 you can file a s27a apication to the First Tier Property Tribunal for them to determine the reasonableness of the charge. If they think it isn’t reasonable, you won’t have to pay it.

I am on the other side of this as a manager who has to arrange this type of insurance. We have never taken any commission for what is probably the simplest part of the job.

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