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Problems
experienced by owners of properties in Blocks of Flats / Joint
Freehold
Released
5th November 2007
Summary:
Mortgage lenders often pressurise
the owners of flats and apartments to take out additional
insurance when they are already covered under the block management
policy. Neil Cook of Delite insurance who works with jml insurance
is very concerned about this practise.
jml
insurance.co.uk works the Delite Insurance Agency from Kent.Neil
Cook of Delite Insurance is very concerned about the pressures
of Joint freehold and block of flats often experience regarding
insurance requirements by lenders. Neil Cook states that "Whilst
there is considerable press coverage about banks overcharging
I would like to highlight another wrong doing. Banks and lenders
agreed some years ago that they would not force borrowers
to take out their buildings insurance to secure the mortgage!
Although they have used clever marketing to work around this.
The
major issue is that they are mis selling buildings insurance
to owners of flats I know this from personal experience and
from large numbers of clients, the worst case is a gentleman
who was in a flat in a block of 8 each had there own policy!
He checked the policy and found that although the referral
was from the mortgage team to insurance team they had issued
him a policy for a 3 bed semi rather than the 1 bed flat he
owned, this came to light when he wanted to let his flat as
they would not assist.
If
at any point he had claimed the policy would not have been
worth the paper it was written on."
Neil
Cook then went on to say "The
Financial Services Authority (FSA) and BIBA
(British Insurers Brokers Association) back me!
The public need to be informed as the implications are huge"
Dual
insurance occurs when a policy holder is paying for two types
of cover when they only need one and can also apply when they
have been sold cover for building of their individual flat.
The
reason this mostly affects flat owners is although blocks
of residences can be classed as a single unit and can be covered
with just one policy, insurers still offer individual policies
for each individual flat.
Typically
the freeholder will have a policy covering the whole building
and this is usually included in the service charge.
As
many as 10 per cent of the population could be affected and
possibly more, according to Neil.
Neil
Cook explains: "I have been seeing clients with dual cover
for around 10 years but up until recently it was only about
one case per year. A client who lived in a block of eight
flats came to me once and each unit had separate insurance.
"Also
when my wife was in the process of re mortgaging she was persuaded
to take cover, when she already had it.
"Problems
are also arising when a lender knows a building is insured
- this will have been clarified before a mortgage was finalised
- but still offers a borrower insurance. The crux is they
are trying to take money when they don't have to.
"This
can be confusing." Eight separate policy holders may be paying
between £200 and £300 a year but a freeholder's policy for
the whole building may be proportionally half this amount
"If the freeholder has not taken out an individual policy
to cover the housing block, the first step is to approach
them to see if this can be arranged.
"Failing
that, residents should club together and form their own resident's
association and take out a policy in the name of, for example,
123 The Avenue."
Neil
Cook says paying to form a limited company is not necessary;
becoming an association will suffice and is free.
"This
document must also prove the interest of the freeholder, acknowledging
they own the freehold, as a note to whoever owns the property
and the names of the lenders.
"This
is to show the current insurable legal interest, as insurance
is a condition of mortgage."
A
key reason residents who do not club together encounter problems
is because insurance company computers only recognise a single
name for the policy and will not accept multiple names such
as Mr Smith, Mrs Jones and Ms French.
Neil
says unmarried couples commonly experience difficulty gaining
joint policies because of this.
He
said: "Modern brokering is very computer focused. If the computer
rejects the information, the policy is often rejected too.
"It
is typically direct insurers who do not sell covers for blocks
of flats but are happy to issue policies for individual units,
as these systems are geared towards a single name. Mr/Mrs
Smith for example, policies only."
"People
just don't realise this is happening. Hopefully they will
and action will be taken." Against the wrong doers.
Delite
say that they "will gladly help anyone who has been mis sold"
Neil says there is vast confusion and considerable amounts
of miss selling involved with this type of property please
do not fall into the traps let Delite provide the correct
cover and they can be contacted via www.jml-insurance.co.uk
Ends....
Company
Information
jml
Insurance.co.uk is
part of jml
Property Services, the trading name of Jeffrey
Milner Ltd. The company is
an UK based company that was established in 1979. jml insurance
acts as an introducer for insurance companies selling property
insurance including landlord and tenant rental products, pet
insurance, wedding insurance, motor insurance, car hire excess
insurance, travel insurance and non standard insurance products.
They also operate jmlvillas.com
an online marketing service for owners of holiday home property
to advertise and are part of the jml
Group that includes jml
Training and Consultancy.
©
jml Property Services November 2007
March
2008: Neil Cook now works for Ember
JD Insurance Brokers
See
also: Now
angry leaseholders kick back at the brokers -2nd March 2009
Leaseholders
are concerned by commission earned by Block Management Agents
- March 2009
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