How are landlords/Corporate Companies still ripping off lessees?
There was a recent case from a Tribunal regarding the Regis Group. Leaseholders now have a model example of how to fight excessive insurance costs via a Tribunal against the Regis Group.
Jeremy Peachy, a chartered surveyor, challenged the £13,000 insurance costs of a 30 flat site in Northampton. Regis Group/Pier Management owned the freehold.
The Tribunal found that the insurance costs were excessive. They ordered to reduce the bill down by at least two thirds to £4,364.00. The Tribunal made a Section 20C order barring the freeholder from putting any of his costs into the leaseholders account as well.
The Regis Group which owns over 30,000 freeholds argued that it bought insurance on a portfolio basis, not by individual properties. This is an argument used by many freeholders. The Tribunal made the following statements about the situation:
“It is the ability to buy bulk that enables them to earn commission of 15% on that portfolio as a whole for the return of work done.”
“The terms of the “block policy” were not so disadvantaged to justify a premium increase from £3,795.36 to £12,998.40 particularly when one of the virtues of a “block policy” for the tenant is that it carries a discount.
The Insurance Industry
It is not unusual for freeholders or managing agents to make a mark up of at least 15% on insurance.
Insurance commissions are a huge revenue earner for speculators in residential freeholds. Bumping up commissions when leaseholders are unaware as they are not part of the contract. This is also a practice known as padding the insurance. It basically means that freeholders will insure their properties and add a substantial amount to the premium via the broker.
Did you know that you are entitled under the Law to ask what commission the managing agent and/or freeholder earns? They have to disclose the full amounts of any money they receive. It is often not known or used. We find that most managing agents will try and state that they use the money for “claims” or to help to reduce your overall management costs. This should never be the case.
We do not pay commission to managing agents and are therefore more than happy to be transparent regarding any commission that we receive. Whilst we do receive money for providing the insurance itself we provide a completely transparent service. We are not beholden to any freeholders or managing agents. We provide a fantastic comprehensive cover at the best rate we can provide in the market. Not only in the first year but every year thereafter.