Are you fully covered by your leasehold property insurance?

The perfect situation for most leasehold property owners is one where the freeholder doesn’t interfere every five minutes. Having said that, when you can’t get hold of your freeholder – ever – the dream can turn into a nightmare.

The freeholder, in the vast majority of cases, is responsible for providing buildings insurance, with the leaseholder providing reimbursement via the service charge.
This charge also covers the cost of the maintenance and upkeep of the communal areas, which is an additional responsibility of the freeholder.

Insurers are receiving more and more calls from homebuyers, interested in making a freehold purchase enquiring about whether they can pay for their own buildings insurance if they purchase a leasehold property. This is directly as a result of an increasing number of absentee freeholders who can’t be tracked down, so buyers have no proof that the building is insured. Without this proof, lenders won’t grant a mortgage.
It would seem to be easier and more straightforward to obtain a mortgage if you decide to buy freehold rather than leasehold

In many instances you can’t insure the property yourself, or at least not until you move in, unless it explicitly states in the lease that this is possible…and if you haven’t got insurance in the first place, your lender won’t let you have a mortgage.

To add to the problem, the situation isn’t always clear cut. There is no easy answer when it comes to who is responsible for insuring the property It depends on the terms of the lease…in some cases it is the leaseholder’s responsibility, but generally the freeholder provides cover and passes the cost on to the leaseholder…People need to engage a solicitor before signing a lease or obtaining a lease extension, to find out whether they are responsible for insuring the property. If they don’t have insurance and it burns down, they can find themselves responsible for the rebuild costs.