insurance
📖 What is insurance? Meaning and definition
In UK tenancy law, insurance typically relates to property insurance, which is a contract landlords enter into to protect their leasehold stock or other properties. This can be a significant cost, often forming part of the service charges that tenants or lessees are required to pay. The cost of such insurance, known as the premium, can be influenced by factors such as the type and age of the property, its listed status (e.g., Grade II* Listed), and any previous claims made against the policy.
Landlords, particularly those managing multiple leasehold properties, may engage a specific policy provider for their buildings insurance. In some cases, a landlord might obtain insurance through a 'block policy arrangement' with brokers, which covers various premises, including industrial/commercial sites alongside residential properties. If a significant claim is made under such a block policy, for example due to a fire at an unrelated site, it can impact the ability to obtain future insurance and lead to higher premiums, potentially from specialist insurers like Lloyd’s of London.
For qualifying long-term insurance agreements, landlords may be subject to consultation requirements under Section 20 of the Landlord and Tenant Act 1985. However, in certain circumstances, a Tribunal can grant dispensation from these consultation requirements, allowing the landlord to enter into the insurance contract without prior consultation. It is important to note that granting dispensation does not determine whether the service charge costs associated with the insurance are reasonable or payable; that remains a separate consideration.
📋 Requirements
- The insurance agreement must be a 'qualifying long-term insurance agreement' for consultation requirements to apply.
- Landlords may need dispensation from consultation requirements under Section 20ZA of the Landlord and Tenant Act 1985.
- Lessees are typically required to contribute to the insurance premium as part of their service charge costs.
- The property's characteristics, such as being Grade II* Listed, can influence the choice of insurer and premium.
📝 Procedure
- A landlord seeks dispensation under Section 20ZA of the Landlord and Tenant Act 1985 from consultation requirements.
- The Tribunal reviews the application for dispensation regarding the insurance contract.
- If granted, the Tribunal's decision is made available to each lessee.
- The landlord enters into the insurance contract, which may be for a multi-year term (e.g., 3 years).
- Lessees are charged their proportion of the insurance premium as part of service charges.
💡 Examples
- A council managing 666 leasehold properties sought dispensation to enter into a 3-year contract for property insurance without consulting all lessees first.
- A landlord had to obtain insurance through Lloyd’s of London at a higher premium after a significant fire claim at an unrelated site covered by their block policy.
- A tenant disputed their share of service charges, which included a contribution towards the insurance premium for a Grade II* Listed property.
- Directors of a property management company approved the budget for insurance, opting for a specialist provider due to the unique nature of the building.
📚 Legal basis
- Landlord and Tenant Act 1985
❓ Frequently asked questions
What is 'dispensation' in relation to insurance for tenants?
Dispensation is when a Tribunal allows a landlord to bypass the usual consultation requirements for a long-term insurance agreement. This means the landlord can enter into the insurance contract without first consulting the lessees, as would normally be required by law.
Does dispensation mean I have to pay whatever the landlord charges for insurance?
No, granting dispensation only means the landlord didn't have to consult you before getting the insurance. It does not mean the service charge costs for that insurance are automatically reasonable or payable; you can still challenge the reasonableness of the costs separately.
Why would a landlord need dispensation for an insurance contract?
A landlord might need dispensation if there's an urgent need to secure insurance, or if the consultation process would be impractical, for example, with a very large number of properties or specific circumstances that prevent timely consultation.
Can a previous insurance claim affect my insurance costs as a tenant?
Yes, if your property is part of a block policy, a significant claim made by the landlord, even at an unrelated site covered by the same policy, can lead to higher premiums for the entire block, which may then be passed on to tenants through service charges.
What if I think my landlord's chosen insurance provider is too expensive?
Landlords are generally expected to choose a reasonable insurance provider. If you believe the cost is excessive, especially if cheaper options were available for similar coverage, you may be able to dispute the reasonableness of the service charge costs at a Tribunal. It is advisable to seek legal advice from a qualified solicitor if you wish to challenge service charges.
Are all types of properties insured under the same kind of policy?
No, the type of property, such as a Grade II* Listed building, can influence the choice of insurer and the policy terms. Specialist properties may require specialist insurance providers, which can affect the premium.