Insurance for a rented flat can involve several different parties.
The freeholder may insure the building. A managing agent may administer the policy. A right-to-manage company may arrange cover for the block. The leaseholder may pay towards the premium through the service charge, while the tenant remains responsible for their own possessions.
That does not mean the individual landlord can simply assume that everything is insured.
The lease, block policy and landlord’s own insurance arrangements must be examined together. Otherwise, important gaps can remain between the building as a whole and the landlord’s responsibilities inside the flat.
Start with the lease
The lease is the starting point for understanding who must arrange insurance and what each party is required to do.
It may state:
- Who is responsible for insuring the building
- Which parts of the property must be insured
- Which risks should be covered
- How the premium is recovered from leaseholders
- Whether the freeholder’s or management company’s interest must be noted
- What happens when damage occurs
- Who pays the policy excess
- Whether the leaseholder can request insurance information
- What restrictions apply to subletting or different forms of occupation
In many blocks, the freeholder, residents’ management company or right-to-manage company arranges one buildings policy covering the entire structure. Leaseholders then contribute towards the cost through the service charge.
However, arrangements vary. A landlord should never rely on what happens in another block or assume that paying a service charge proves that every relevant risk is insured.
What does block buildings insurance normally cover?
A block policy is generally intended to insure the physical building rather than the contents belonging to each leaseholder or tenant.
Depending on the wording, the insured property may include:
- The roof, foundations and external walls
- Internal structural walls
- Floors and ceilings
- Communal halls, stairs and landings
- Shared doors and windows
- Fixed plumbing, drainage and electrical installations
- Lifts, boilers and other communal plant
- Garages, bin stores, gates and boundary structures
- Fixed kitchens and bathroom fittings
- Decorations and other fixtures where the policy includes them
The exact definition of “building” matters. Flooring, internal decorations, fitted units and improvements made by an individual leaseholder may not always be treated in the way the flat owner expects.
If the leaseholder has installed an expensive kitchen, bathroom or other improvement, they should establish whether it is included within the block policy and rebuilding assessment.
The rebuilding cost should cover the whole block
The building should normally be insured for an appropriate reinstatement value rather than its market price.
For a block of flats, this may need to reflect:
- Demolition and debris removal
- Professional fees
- The structure of every flat
- Communal areas
- Lifts and shared plant
- Outbuildings and external structures
- Compliance with current building requirements
- Specialist materials or construction
- The cost of rebuilding in a restricted location
An individual flat’s sale value cannot simply be multiplied by the number of units to produce a reliable rebuilding figure.
The party arranging the block policy should review the declared value and consider when a professional reinstatement-cost assessment is appropriate. Leaseholders and landlord owners should raise questions if the figure appears outdated or does not reflect major alterations.
Underinsurance can affect the amount paid following a claim, depending on the policy wording and circumstances.
What is the freeholder’s role?
Where the lease makes the freeholder responsible for insurance, the freeholder must normally arrange the policy in accordance with the lease and recover permitted costs through the service charge.
The freeholder may appoint a managing agent or broker to handle the practical administration, but the underlying obligations do not disappear simply because another organisation performs the work.
Important tasks can include:
- Arranging and renewing suitable block cover
- Maintaining an accurate building description and rebuilding value
- Declaring claims and material property information
- Collecting contributions from leaseholders
- Providing insurance information where required
- Reporting claims and coordinating repairs
- Communicating policy conditions to residents and leaseholders
A block policy arranged for an owner-occupied development may not remain appropriate if a substantial number of flats are sublet, used for short stays or otherwise occupied differently. The insurer must receive accurate information about the building’s real use.
What changes when there is an RTM company?
In England and Wales, qualifying leaseholders may be able to establish a right-to-manage company—usually described as an RTM company—to take over specified management functions without purchasing the freehold.
When management transfers, the RTM company will need to ensure that appropriate buildings insurance is in place. Timing is important because the previous policy may be cancelled, transferred or allowed to continue only with the insurer’s agreement.
The RTM company should establish:
- When the existing policy expires
- Whether it can be transferred or continued
- Whether a replacement policy is required from the handover date
- How the premium will be funded
- What claims have occurred
- Whether there are outstanding claims
- What rebuilding assessment supports the sum insured
- Which specialist policies are required
- Who will administer emergencies and claims
An RTM company may also need to consider terrorism cover, engineering inspection or plant insurance, employers’ liability where staff are employed, and directors’ and officers’ protection for those running the company.
The statutory right-to-manage framework referred to here applies to England and Wales. Scotland and Northern Ireland have different property-ownership and management arrangements, so landlords should take advice appropriate to the location of the building.
What about share-of-freehold arrangements?
Owning a share in the freehold does not usually mean that each flat owner should insure only their own section of the building.
The freehold company or participating owners will generally need to arrange one coordinated policy for the entire structure. Separate policies for individual flats can create overlaps, gaps and disputes when damage crosses boundaries.
The directors or owners responsible for arranging cover should check that:
- Every part of the building is included
- The legal insured entities are correctly named
- The property description and occupancy are accurate
- The rebuilding value is appropriate
- Communal liabilities are covered
- Directors understand their responsibilities
- Claims and emergency procedures are documented
Individual landlords still need to consider what protection they require beyond the block policy.
What must the individual landlord consider?
A landlord who owns and lets a flat should obtain a copy of the current block-policy schedule and relevant wording. They should not rely only on a service-charge demand or confirmation that the building is insured.
The landlord may need separate protection for:
- Furniture and appliances supplied with the flat
- Carpets, curtains and other landlord-owned contents
- Accidental damage where required
- Malicious damage by tenants where available
- Loss of rent following insured damage
- Property owners’ liability relating to the landlord’s own responsibilities
- Rent and legal protection
- Home emergency assistance
- Legal liabilities arising from letting the flat
Some specialist landlord-flat policies are designed to sit alongside the block buildings policy. The insurer or broker should be told precisely what the block policy covers so that the landlord’s individual protection is arranged on the correct basis.
Cover should complement the block insurance, not unnecessarily duplicate it.
Landlord contents are different from tenant contents
The block buildings policy will not normally insure possessions belonging to the tenant.
The landlord’s own contents may include:
- Sofas, beds and wardrobes
- Freestanding cookers and appliances
- Tables and chairs
- Curtains and removable blinds
- Landlord-owned carpets where treated as contents
- Furniture in a let room or flat
The tenant is responsible for considering insurance for their own belongings, including clothing, electronics, furniture and other personal possessions.
The inventory should clearly distinguish landlord-owned items from the tenant’s possessions. This can be important when damage affects both during the same incident.
Communal contents and liabilities can be overlooked
A block may contain property that does not belong to any individual flat owner, such as:
- Hallway furniture
- Communal carpets and curtains
- Cleaning equipment
- Garden machinery
- Entry systems
- Gym or shared-room equipment
- Office equipment used by the management company
The party arranging the block insurance should check whether these items fall within the building definition or require communal contents cover.
Communal areas can also create liability risks. Visitors, contractors, tenants and residents may be injured in halls, stairways, car parks or shared gardens. The policy should provide an appropriate liability limit for the organisation responsible for the building.
Who deals with a water leak?
Leaks between flats are among the most common and complicated block claims.
Several issues may need to be separated:
- The cost of repairing the pipe, appliance or failed seal that caused the leak
- Damage to the structure and fixed surfaces
- Damage to landlord-owned contents
- Damage to the tenant’s possessions
- Loss of rent while the flat is uninhabitable
- The policy excess
- Responsibility for maintenance
The block insurer may deal with insured damage to the building, while the individual landlord’s insurer considers contents or loss of rent. The tenant may need to claim under their own contents policy.
The failed component itself may not be insured if the problem resulted from wear, deterioration or inadequate maintenance.
Landlords should report the incident promptly to the managing party and their own insurer. Photographs, reports, invoices and correspondence should be retained.
Substantial repairs should not normally be authorised before the relevant insurer has explained its requirements, unless urgent work is necessary to prevent further damage or make the property safe.
Who pays the excess?
The block policy may impose different excesses for escape of water, subsidence, accidental damage and other claims.
Who ultimately bears that cost may depend on:
- The lease wording
- The cause and location of the damage
- The service-charge arrangements
- Whether a particular leaseholder was responsible
- The policy terms
- Decisions made by the freeholder, RTM company or management company
It should not be assumed automatically that the owner of the flat where a leak began must always pay the excess. Equally, it should not be assumed that the cost must always fall on the general service-charge fund.
The lease and the circumstances should be examined before responsibility is allocated.
Check the lender’s requirements
A mortgage lender will normally require suitable buildings insurance to remain in place.
For a leasehold flat, the lender may accept the block policy but require evidence of cover, the insured risks, the rebuilding value and the lender’s interest. The landlord should retain current documentation and respond promptly when the lender requests it.
The existence of block insurance does not remove the need to comply with any separate conditions in the buy-to-let mortgage concerning occupancy, subletting or property use.
Questions every landlord of a flat should ask
Before buying, letting or renewing insurance for a flat, establish:
- Who arranges the buildings insurance?
- Does the policy cover the entire block?
- Is the rebuilding value current?
- Are communal areas, outbuildings and shared plant included?
- Are improvements inside the flat covered?
- Does the insurer know that the flat is tenanted?
- What excesses apply?
- Who reports and manages a claim?
- What loss-of-rent protection is included, if any?
- Which landlord-owned contents need separate cover?
- Are there unoccupancy or short-letting restrictions?
- What additional protection does the individual landlord require?
NetRent works with Clear Insurance Management and its experienced property-insurance team to help landlords, freeholders, management companies and RTM companies review these arrangements properly.
If you own or manage flats and the insurance is approaching renewal, send us the lease information and existing policy documents. We can examine the property details, cover, limits, conditions and premium before discussing an appropriate alternative.
Telephone: 01352 721300
Email: insurance@netrent.co.uk
A block policy protects the building, but every party still needs to understand where that protection begins—and where their own responsibility remains.
NetRent does not provide legal advice. This article represents our general understanding of the landlord insurance and rental property market and is provided for information only.