Share of Freehold Buildings Insurance

Who arranges insurance for a share-of-freehold property?

The freehold owners jointly — normally through the company that holds the freehold, or directly between themselves where the freehold is held by up to four individuals. The leases usually remain in force and continue to set out who insures and how the cost is shared.

Buying a share of freehold does not extinguish the leases. In most cases the flat owners now sit on both sides of the same lease: as leaseholders and, collectively, as the landlord. The insuring covenant still applies and still needs someone to carry it out.

Where a company holds the freehold, that company is the policyholder and the directors organise renewal. Where individuals hold it jointly, the policy should be in all their names, or in the name of one acting for all with the others' interests noted.

Things to consider

• Decide in writing who is responsible for renewal each year — verbal arrangements fail when someone sells.
• Keep the policy in the same name as the freehold title to avoid insurable interest questions at claim stage.
• Tell the insurer if a flat is let out, unoccupied or undergoing works.

Read next: Who insures a block of flats · RMC buildings insurance

Can share-of-freehold flats be insured separately?

Technically possible in some small conversions where the leases allow it, but a single policy over the whole building is the standard approach because it avoids gaps, duplicated cover and disputes between insurers after a fire or leak.

Separate policies create a practical problem the moment damage crosses a flat boundary — which escape of water almost always does. Two insurers then argue over apportionment while the building sits damaged.

Separate policies also leave communal parts, the roof and the external walls in no man's land unless someone deliberately insures them, and they make property owners' liability for shared areas harder to place.

Read next: Converted vs purpose-built flats

How is the premium split between share-of-freehold flats?

According to the proportions in the leases, which are often based on floor area or rateable value rather than an equal split. Where the leases are silent, the freeholders need to agree a fair basis and record it.

Equal splits feel natural in a two-flat house but can be unfair where one flat is substantially larger, occupies the ground floor with the garden, or includes a basement. The lease percentages exist precisely to settle this.

Keeping a simple annual record — premium, insurer, sum insured, each flat's share and the date paid — prevents the disputes that surface when a flat is sold and the buyer's solicitor asks for the last three years of insurance information.

Read next: Recovering the premium

What insurance do the individual flat owners still need?

Contents insurance for their own belongings, and cover for any fixtures, fittings or improvements the block policy does not pick up. Some owners also add tenants' liability or landlord cover if they let the flat out.

The dividing line between the block policy and a personal policy is set by the lease. Some leases put fitted kitchens, bathrooms and floor coverings inside the building; others leave them with the flat owner. Reading it once saves a difficult conversation after a claim.

If a flat is let, the owner should tell both their own insurer and whoever arranges the block policy, as occupancy is a material fact.

Read next: What landlord insurance covers