ISSUE No.108 Spring 2014
LEASEHOLDERS LOSE OUT AGAIN This Time it’s Water
Leasehold property is being left out of the new national Flood Reinsurance (Flood Re) Scheme, which will provide universal flood insurance cover, at a price that property owners can afford.
FPRA has alerted MPs to the fact that the Water Bill, which introduces the scheme, and is now going through Parliament, is leaving leaseholders out.
Vice-Chairman Richard Williams has written (on the behalf of the FPRA) to the Chairman of the Environment, Food and Rural Affairs Select Committee, Anne McIntosh MP, to express concern about significant exclusions to the Bill, including many homeowners:
“From what we understand, and unlike previous arrangements, there will be significant exclusions from Flood Re.
“As things stand, the following will be excluded:
“Blocks of flats and other leasehold property will be excluded. This will therefore exclude many homeowners that live in flats or maisonettes. This is because most flats and other forms of leasehold property, whether the insurance is arranged by a freeholder or the leaseholders, is insured on a block basis for building insurance and therefore treated as a ‘commercial’ policy. Leases normally preclude individuals insuring their own ‘part’, the reason being to ensure that the building as a whole is always protected, and not just parts of it.
“Housing association and council-owned homes are also treated as commercial and excluded.
“Property in Band H for council tax purposes. There seems no technical or obvious reason why Band H property should be excluded.
“Some static caravans, (park homes) and mixed-use property are also likely to be excluded.
“At this stage the Bill can be amended to correct this situation before it becomes an Act of Parliament and we would urge you to make changes to correct this situation.”
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A copy of the letter has also been sent to all relevant MPS and Lords. We would also encourage our members to write to their MPS. As we go to press, we are awaiting responses.
The British Property Federation (BPF) has also voiced concern that the Government’s Flood Re proposals will exclude large swathes of UK property, leave some premises uninsurable, and therefore push their owners into technical mortgage default.
The BPF estimates that millions of homes will be excluded from Flood Re, with the proposals, due to be implemented in summer 2015, excluding most buildings cover for leasehold properties, the entire private rented sector, SMEs, housing association and council-owned homes, and properties in council tax Band H.
BPF says 4.1 million leaseholders could be denied access to Flood Re, and therefore face the possibility of being uninsured or paying significantly greater premiums to insure their property.
The buildings insurance on such properties is deemed by insurance industry to be non- domestic, rather than domestic, and hence the exclusion from Flood Re. Leasehold property such as flats, however, has to be insured on a block basis to ensure the whole building is insured. The man-on-the-street and those who
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