A common area of dispute between tenants and landlords is provision of insurance under the terms of the lease.
The most common ways in which a dispute can arise about insurance are: (i) where there are inadequate or often, no provisions for insurance commission paid to the landlord for selecting a particular insurer; or (iii) where the tenant is required to insure with one particular insurer or one nominated by the landlord and the premiums are excessive.
How can insurance provisions be challenged?
Where the lease provides for inadequate (or often no) provision for insurance, Lease Variation should be considered (either by consent of all parties or by making an application to the Leasehold Valuation Tribunal).
Sometimes landlords may receive often excessive commissions from insurers. Where this is the case, it is often hard to challenge, although evidence can be used to show that the landlord is not negotiating the insurance premiums at arms length.
Situations in which a leaseholder is required to insure the property with one particular insurer or one nominated by the landlord, either the tenant or the landlord may apply to the Leasehold Valuation Tribunal for determination of one of two things, namely:
- whether the insurance that is provided is unsatisfactory i.e. the level of cover is inadequate, where the cover is defective, for example there is a fundamental conflict between the description of the property insurer and the actual property or where the insurance has been arranged through a insurer that is not of good repute and standing;
Or
- whether the premium payments are excessive.
Decisions
Where an application is made to the Leasehold Valuation Tribunal in respect of insurance provisions, it is advisable for leaseholders to produce evidence to the Tribunal at the Hearing of insurers they wish to see nominated and highlight clearly their reasons for such a choice.
The Leasehold valuation Tribunal will then make an order requiring either the landlord (i) nominate an insurer specified in the Order or (ii) nominate another insurer who will be capable of meeting the requirements as set out by the Leasehold Valuation Tribunal.
Conclusion
Insurance provisions are often disputed between leaseholders and landlords largely because leaseholders take a different view of some risks that need to be insured against from that of a landlord due to different property interests each party has. However, whilst this is true, leaseholders should not pay excessive premiums for insurance cover and there are remedies available (as set out above) if leaseholders feel this is what is happening.
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