Freeholders Buildings Insurance

The freeholder is the person or company that ultimately owns the buildings and the land on which they’re built. The freeholder then gives a lease to a person to occupy the building or a part of it for a set period of time. If the lease hasn’t been extended at the end of that period, the right to occupy ceases, the leaseholder has to vacate and the freeholder is free to sell the lease to another person.

Often the freeholder also acts as a landlord and will rent the flats out rather than leasing them, generally for much shorter periods. The freeholder usually is responsible for maintaining and repairing the exterior and common parts of a building; this includes arranging the building insurance.

It covers the cost of repairs to the fabric of your building if damaged by what is known as the insured perils such as fire, storm, flood and many other risks. The policy also usually covers loss of rent or alternative accommodation whilst the repairs are being carried out following an insured loss, and your liabilities as a property owner to other parties if they are injured on your property. You should always check your policy to understand what is and what isn’t covered, as policies do differ.

Buildings insurance for properties that comprise of more than one dwelling, such as flats and apartments, is usually the responsibility of the person who owns the freehold – or shared freehold – of the property. This is the freeholder. Insurers usually refer to this type of buildings insurance as block insurance or block cover. It can be for something as small as two flats in a converted house, a big purpose built block or a converted building with multiple flats.

Legally, it’s a property that is “free from hold” of any entity (individual or corporate) other than the owner. In plain English, if you own the freehold of your property — or equal share of the freehold — then you basically own either outright or with a loan, such as a mortgage, the land and the property on that land.

If you own outright or a share of the freehold of a property, then it’s normally your responsibility to arrange the buildings insurance cover, either direct or (as many freeholders do) through a property management company. However, an increasing number of residents associations have taken on this function after applying to the courts and getting the “right to manage.” Leaseholders hope that by doing this they will get more control and save money on insurance costs.

If you are the leaseholder of a flat, then the buildings insurance should be arranged by the freeholder or landlord of the building — but do check — and you’ll usually be charged a share of the cost of the buildings insurance. You’ll still need to arrange your own contents cover.

Apartment or flat, they are the same for insurance purposes. If you are a leaseholder of a flat, you will normally find that the whole building — including the part you lease — has been insured by the freeholder, or possibly a resident management company. If so, you may be paying a share of the premium as part of your service charge.

In short, you own the property and the land on which it’s built. Typically, the freeholder is a company, person or persons who own the freehold of the building. Flats and apartments are usually owned on a lease — making them leaseholders — but the freeholder owns the property outright.

If you own the freehold of a property, or a share of the freehold, then you’re responsible for repair and maintenance of the building’s exterior and any communal parts. This includes ensuring suitable block of flats insurance cover is in place.

There are advantages to being a freeholder. You’ll most likely have complete control over the property and, subject to the terms of the lease, may need to be consulted if a leaseholder wants to amend the internal structure of their flat. Also, it’s unlikely you’ll be subject to further payments, like ground rents, service charges or administrative fees, which can be the case with some leasehold properties. Not least, for many leaseholders, as time goes by the length of time on the lease reduces and extending a lease can be expensive — not to mention that some mortgage lenders require a lease to have a minimum number of years left to run before they will even consider lending on it if you decide to sell.

On the other hand, as a freeholder, it most likely will be your responsibility to properly maintain the exterior of the property and communal areas. A freeholder also needs to ensure the whole building has appropriate insurance cover — with the cost usually divided equally between all the leaseholders who own a flat in the property as part of their annual service charge bill. Some freeholders elect to use a managing agent to arrange this for them.