Tenants Succeed in Avoiding Insurance Charges

When tenants discovered that their landlord had bought insurance over their flats, including the structure of the building, when they had already purchased insurance cover for themselves, the resulting argument ended up in the Upper Tribunal (UT).

The tenants' leases contained a provision that they were liable for their share of 'the amount of the premium or premiums payable in respect of any insurance or insurances effected by the Lessor'. They were required to obtain insurance in the joint names of themselves and the landlord, but not all did so. Up until 2014, there were no issues. Agents acting on behalf of the original lessor arranged insurance cover for the common areas of the building, leaving the individual leaseholders to insure their own flats.

In 2014, a new freeholder took over the property. Following a revaluation of the sum insured, the annual premium for the insurance increased by more than £150 per flat and further substantial increases occurred in 2015 and 2016.

The 27 flat owners argued that the landlord was not permitted to charge for insuring more than the communal areas, so did not have the right to buy the insurance for individual flats or to recharge it as a cost to the tenants as a whole. Some, but not all, of the tenants had listed the landlord as an interested party in their insurance policies, which they claimed was sufficient to discharge their responsibilities under the lease.

The UT concluded that the lease terms did give the landlord the right to buy the insurance and recover the cost from tenants if they failed to insure their premises in the manner required by the lease. However, because the insurance taken out by the landlord was not in accordance with the agreed specification, the cost was not recoverable from the tenants. Landlords must be reasonable in their approach to issues such as this and ensure they comply strictly with their own obligations to their tenants.