LEASEHOLDERS ACROSS the country are ‘struggling to pay the escalating costs’ of building insurance due to fire safety issues stemming from combustible cladding.
Consumer group Which? reported on the ‘scandal’ afflicting leaseholders in flats with combustible cladding alongside ‘other unsafe materials’, with insurance bills ‘skyrocketing’ as a result. Leaseholders from across 16 separate blocks are paying an average of over 500% more for buildings insurance than one year ago, which is adding thousands of pounds to annual service charges, due to ‘unsafe building materials’ being found during post Grenfell fire safety surveys.
The group said that ‘one of the most extreme cases’ was that of The Decks in Runcorn, which was reported recently (https://www.thefpa.co.uk/news/-fire-trap-residents-concerned-about-evictions) to have seen premiums increase from £34,000 in 2019 to £254,000 in 2020, and up again to £525,000 in 2021 – a 1,448% increase ‘in just two years’. Some leaseholders are paying over £3,000 a year each for insurance ‘that used to cost them just a fraction of that price’, on top of ‘eye-watering’ waking watch costs and ‘looming’ remediation bills.
These costs were said by Which? to potentially ‘leave leaseholders bankrupt or homeless if unpaid’, and it noted that building insurance is ‘essential’ in order to sell properties, because ‘banks will not offer mortgages on properties that are not covered’. A freeholder will choose a policy and pass costs on to leaseholders via service charges, meaning the latter are ‘rarely if ever involved’ in the decision making process.
Matt Hodges-Long, founder of the Building Safety Register, stated on this point: ‘From a leaseholder’s perspective you don’t see any of the negotiations. You don’t know who’s been offering what, you don’t know what the terms are. You just get told “this is your proportion of the bill” and it comes through in the service charge.’
Another block, The Landmark in Bexhill on Sea, saw insurance rise by 400%, with each leaseholder’s service charge having then ‘doubled’, requiring the building’s tenant’s association committee to meet with the management company ‘to help fix the problem’. Leaseholder and association chair Aileen Williams said: ‘I would say probably about 60% of the residents in the building are able to pay the increased service charges.
‘But there are certainly quite a high percentage of people living in the building who cannot afford to pay it. They’re on a limited income, they’re on pensions. Maybe they haven’t got that much savings. We went through every item on the budget for this year, discussing it and agreeing between us where we could make other cuts because of the insurance premium.
‘We’ve reduced everything as much as we can in order to bring the service charges down as much as possible. But they are still going to be double. So if we hadn’t cut other areas they would have been considerably more than that. There are people who are really, really stressed. I wasn’t sleeping for weeks – it was all going round in my head.’
Another example was that of Wicker Riverside in Sheffield, which ‘wasn’t even fortunate enough to secure the privilege of paying through the nose’ for the increased premiums, as when the policy came up for renewal ‘it was unable to secure cover from any insurer’, meaning that leaseholders ‘will have to pay for any damage to the building themselves’, whether from fire or flooding. This will also ‘make switching mortgage difficult’, the group added.
Leaseholder Jenni was worried during the recent flooding that the building, which backs onto the River Don, would be damaged and the leaseholders would have to pay. She added: ‘People think leaseholders in this situation are being overdramatic. But I cry every day about this situation and my friends would describe me as a strong person.
‘It’s just too much for people to be able to handle. When you can’t get insurance at all it adds to the stress. Everything feels heightened because it’s a case of, well, if something goes wrong I lose absolutely everything in one go.’
A spokesperson from the Financial Conduct Authority (FCA) said that it ‘expects’ insurers to assess buildings with ‘due skill, care and diligence, paying due regard to the interests of their customers and treating them fairly’, but Mr Hodges-Long said that the price rises should be tracked by the FCA, adding: ‘The regulator’s job is to make sure that the market is fair and operating not to the detriment of consumers. I think we’ve got a huge class of consumer here that lacks protection.’
The FCA spokesperson added in turn that different insurers ‘use different approaches to set premiums’, and that some of its proposed new rules ‘would cover the sale of buildings insurance for apartment blocks’. However, Which? said it was ‘unclear whether this would in fact result in premiums becoming lower’.
It shared a response from an Association of British Insurers spokesperson, who said: ‘Insurers understand and sympathise with the challenges some leaseholders are facing. Sadly, some types of cladding present a greater fire risk, which has to be reflected in the cost of insurance. Three and a half years on from the Grenfell tragedy, there is an urgent need for building owners and the government to ensure that buildings have dangerous combustible materials removed as soon as possible to make sure people are safe. Safer homes can be reflected in insurance costs.’
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