2 Federation of Private Residents’ Associations Newsletter Keeping up the Pressure
FPRA is not taking it lying down that leasehold property is being left out of the new national Flood Reinsurance (Flood Re) Scheme. Further to his letter to Anne McIntosh MP, Chairman of the Environment, Food and Rural Affairs Select Committee (reported in our last newsletter),
Dear Minister Flood Re exclusion of leaseholders
We wanted to express disappointment at the Government’s stance on the exclusion of leasehold buildings insurance from Flood Re and the way this is being portrayed by Government and the insurance industry in the media.
The FPRA represents over 500 Residents’ Associations and resident owned freehold companies, including: Right To Manage Companies, Commonhold, and most other forms of Resident Groups. It is fair to say that our members, who are mainly homeowners, are not happy at being discriminated against by the Flood Re arrangements.
Our understanding of Flood Re is that it goes beyond the Statement of Principles in guaranteeing the affordability of flood cover, and not just its availability. That guarantee lasts for 25 years for people occupying houses.
For people occupying flats all they are being offered it seems to us is some vague assurance that if things get bad, as determined by some future Government and the insurance industry, they may or may not intervene.
Such a dichotomy of treatment, simply because some people own houses and others own flats, is difficult to understand and accept, particularly from political parties who like to portray themselves as the friends of homeowners.
We wanted to also comment on the recent statement the Government put out on its flood summit with the insurance industry, where it was stated that “freeholders are legally responsible for buying building insurance for their leaseholders.”
Whether that was accidently or deliberately meant to mislead we don’t know, but for the avoidance of doubt most of our members are running their own buildings – hard-working people who do it on a voluntary basis and who are not any different to the people who live in houses.
To underline this, Government figures show that leasehold property management arrangements broadly break down as follows:
33 per cent self-managed by lessees 14 per cent managed directly by landlord
14 per cent managed by landlord who appoints a managing agent 33 per cent managed by lessees who appoint a managing agent
The insurance industry as represented by the Association of British Insurers (ABI) who we know the Government has been working closely with over this Act have for many years failed to act over gross injustice in the way that leasehold blocks are treated. We have on many occasions written to the insurance regulators as well as the treasury and others and it would be extraordinary if this Government were on new legislation to introduce a new injustice for leaseholders.
Historically buildings insurance for leaseholders was arranged by big commercial freeholders and thus the insurance industry treated the arrangement of leasehold block insurance as commercial not residential.
Over the last few decades and as a result of Government legislation giving leaseholders the right to buy their freehold this has changed and the majority of blocks of flats insurance are now arranged by leaseholders or their representatives.
Because the insurance industry has not moved the classification from ‘commercial’ to ‘residential’ leaseholders are continuing in being discriminated against and indeed as a matter of routine overcharged.
This legislation is based upon the ‘Pool Re’ model where again, because of this dichotomy, the insurance industry makes massive charges for terrorism insurance to leaseholders which it does not make to similar sized other householders.
We hope Government will reconsider its position on leaseholders accessing Flood Re and give all homeowners the assurance they need and deserve.
Yours faithfully Richard Williams, FPRA Vice-Chairman
Richard Williams, FPRA Vice-Chairman has now written separately, as follows, to Lord de Mauley, and Dan Rogerson MP, both Parliamentary Under Secretaries of State for the Department.
Issue No. 109 Summer 2014
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