Managing a block of flats involves numerous responsibilities, one of which is ensuring the right insurance cover is in place. Buildings insurance is crucial as it safeguards against the financial impact of damage to the structure and common areas of the property. But, unlike standard residential insurance, insuring a block of flats often comes with more specific demands and nuances. Therefore, understanding precisely what buildings insurance covers when managing a block of flats can help property owners and developers maintain their assets effectively and comply with legal obligations.
What is building insurance?
Buildings insurance is designed to cover the financial cost of repairing or rebuilding a property if they are damaged or destroyed by an insured event. For blocks of flats, this is particularly important as it includes not only individual units but also communal spaces and facilities.
This type of insurance specifically covers the structure of a block of flats, including the exterior walls, roof, floors, and doors. It also covers any fixtures and fittings that are permanently attached to the building.
It differs from residential insurance which typically is purchased by homeowners or renters. It’s important to note that buildings insurance does not cover the contents of a building such as furniture, appliances, or personal belongings, as these items are typically covered by a separate insurance policy.
Buildings insurance can be purchased by the owner of a block of flats or the property manager who is responsible for the upkeep of the property.
Why buildings insurance is essential for blocks of flats
As an owner or property manager of a block of flats, having buildings insurance is crucial for several reasons. Firstly, it provides financial protection against unforeseen events that could cause significant damage to the building. Without insurance, the cost of repairing or rebuilding would fall onto the shoulders of the building owners or residents, potentially leading to financial hardship.
Secondly, buildings insurance for a block of flats is vital for meeting legal requirements in the UK. Under the Landlord and Tenant Act 1985, landlords in England and Wales are legally required to insure their rental properties against loss or damage caused by fire, flood, storm, theft, and other risks. Failure to comply with this requirement can result in fines, penalties, or legal action, including potential claims for damages from tenants who suffer losses due to a lack of insurance.
Furthermore, having buildings insurance can enhance the attractiveness of the block of flats to potential tenants. Tenants are more likely to choose a property that is well-insured, as it provides them with peace of mind knowing that their home is protected.
Finally, buildings insurance can assist in ensuring the long-term viability of the block of flats. By covering the costs of repairs and maintenance, insurance helps preserve the structural integrity and appearance of the building, contributing to its overall value and longevity.
What does buildings insurance cover in a block of flats?
While the specific coverage and terms of buildings insurance for a block of flats will vary between individual policies, we recommend looking for building insurance policies that cover:
1. Structural Integrity
Buildings insurance cover in a block of flats primarily covers damage to the structure of the property. You may wish to consider taking out extra buildings insurance to cover you for windows and doors as well. In a block of flats, this is particularly important due to the shared nature of these elements among all tenants.
2. External Fixtures
Coverage can also include additional structures such as garages, external underground pipes, drains, cables, and gas and electricity supplies as well. Landlords may choose to take out extra insurance to cover for damage to boundary walls, fences, gates and outdoor lighting that forms part of the block of flats, too.
3. Internal Fixtures & Fittings
Pipes, cables, and drainage systems – such as plumbing, electrical wiring and heating systems – are critical for the functioning of any block of flats. Your buildings insurance should also cover the cost of repairing or replacing these if they are damaged by an insured risk.
4. Communal Areas
Buildings insurance for a block of flats often extends to cover damages to communal living spaces, which may include hallways, staircases, lifts, gardens, and other shared facilities. This is vital since these areas receive high traffic and are prone to wear and tear.
5. Rebuilding Costs
One of the key elements of buildings insurance for a block of flats is covering the cost of demolition, rebuilding, and professional fees (like architects and surveyors) after significant damage. Importantly, these costs are generally not equivalent to the market value of the property but rather reflect the rebuild costs, which can be substantially lower or higher depending on the building and location.
Additional coverage options
For added security, landlords might consider extra cover options, such as:
6. Natural Disasters
Policies can provide cover for a number of potential risks related to natural disasters, including fire, storm damage, and flooding. Certain natural disaster coverages, like floods or earthquakes, may be particularly more important if the block of flats is located in a high-risk area.
7. Accidental Damage
This protects against unintentional damages that might occur during everyday operations.
8. Legal & Liability Protection
Liability coverage is also a significant component of buildings insurance for a block of flats, protecting against legal disputes made as a result of injuries occurring on the property due to structural failures or maintenance oversights, damage to someone else’s property, or other issues related to the property.
9. Alternative Accommodation
This covers the cost of temporary accommodation for tenants if the flats become uninhabitable due to insured damage, offering further peace of mind for both landlords and residents.
Common risks covered by buildings insurance for a block of flats
In terms of loss or damage, the typical risks covered by buildings insurance in a block of flats can include:
- Natural Disasters: Damage from storms, floods, or earthquakes.
- Fire and Explosions: Coverage for repairs or rebuilding following a fire or explosion.
- Theft and Vandalism: Although primarily concerning the structure, damage caused by break-ins, vandalism, or attempted theft can be covered.
- Subsidence and Ground Movement: This includes coverage for the sinking or shifting of the building due to unstable ground.
- Vehicle and Aircraft Collisions: Unusual but potentially devastating, this coverage is crucial for blocks of flats near roads or flight paths.
Buildings insurance for a block of flats can also cover risks such as frozen or burst pipes and fallen trees, aerials, lampposts or satellite dishes.
It’s important to contact your insurer to determine exactly what is included and covered in your policy.
Exclusions and considerations
Buildings insurance for a block of flats typically does not cover general wear and tear or damage that results from poor maintenance. This is why it’s essential to ensure proper maintenance and management of your block of flats to avoid such issues arising.
In addition to this, contents within the flats are not covered under a standard policy. This includes individual possessions and internal decoration which are usually the responsibility of the tenant, or a separate contents insurance policy held by the landlord for furnished flats.
The type of building insurance policy you require is determined by your property ownership status, which can be either freeholder, leaseholder, or tenant. In leasehold properties, the freeholder usually arranges buildings insurance, and the cost is recovered through service charges.
The importance of adequate coverage
Landlords must understand the terms and specifics of their buildings insurance policy to ensure that all aspects of their property are adequately protected. Underinsurance can lead to significant financial losses, whereas overinsurance could mean unnecessarily high premiums.
As every block of flats is unique, reviewing the policy details and ensuring they meet the specific needs of your property is crucial. Given the complexity and variability of such policies, it’s worth consulting with insurance experts who can provide tailored advice and solutions to suit your requirements.
If you have any queries related to insurance or any other aspect of property management for freeholders or developers, contact Red Brick Management today. We are able to offer guidance and assistance on a range of different insurances to help arrange the right insurance coverage for you.
