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FLOOD RE LATEST: SMALL LEASEHOLD BLOCKS TO BE INCLUDED BUT STILL NO LIFELINE TO LARGER BUILDINGS

18th March 2014|POSTED BY: Admin

A recent amendment to the Government's Flood Re proposals means that small blocks of leasehold flats will now be included in the new scheme.

Earlier this week DEFRA confirmed that properties with three flats or fewer will be able to secure affordable flood insurance under Flood Re. But there are conditions. Those buildings will only be covered if the freeholder lives in one of the units, or if the insurance is purchased by a leaseholder who has a share of the freehold.

ARMA shares the concerns of others in the industry (such as the British Property Federation) that whilst this represents a step in the right direction, it still means that thousands of leaseholders will be at risk of having to fork out high insurance premiums and in some cases, difficulty in obtaining cover.

An information note issued by DEFRA explains that leaseholders in larger blocks will be excluded from Flood Re because freeholders will be responsible for buying buildings insurance for their leaseholders. But this assumes that all buildings with over three flats will be owned by organisations with enough buying power to secure affordable cover.

This is not the case. Over 60% of the properties managed by ARMA members, for example, are controlled by the leaseholders themselves. These blocks will not have the same expertise as those owned and insured by large investor freeholders and will struggle to get affordable cover.

The residential leasehold sector makes up a significant share of the insurance market and we remain concerned that excluding a large proportion of these properties from Flood Re will put many thousands of homeowners at a considerable disadvantage.

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