If you’re involved in managing a block of flats – whether as a Residential Management Company (RMC), Right to Manage (RTM) company, or a leaseholder – it’s essential to understand how insurance requirements in your lease impact the building and its residents.
This guide will help you decode common insurance clauses, responsibilities, and why certain covers are necessary.
Typically, the lease will specify whether the freeholder or the management company (RMC/RTM) must arrange buildings insurance. Often, the costs are recharged to leaseholders through service charges.
This refers to the total cost to rebuild the entire block if it were destroyed, covering everything from foundations to communal areas.
Why it matters:
Underinsurance can leave the building short of funds to rebuild, leading to costly service charge increases or disputes.
Blocks of flats have unique risks that differ from single homes, such as:
Standard home insurance won’t cover these adequately.
What it means
The building must be insured against a wide range of potential damages.
What it means
The policy must cover damage caused by terrorism.
What it means
Sometimes includes lifts, boilers, and communal equipment.
What it means
The managing agent or freeholder must provide leaseholders with proof of cover on request.
Because standard buildings insurance usually excludes terrorism damage, many leases explicitly require this cover to ensure the block is fully protected against all risks.
Some leases require the management company to hold D&O insurance to protect those running the block against claims arising from their decisions.
Leaseholders have the right to:
