Right to Manage Property Insurance FAQs

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Right to Manage Property Insurance FAQs

What is the Right to Manage?

Specific legislation is in place to grant the leaseholders of property the right to manage the way in which their collective interests – principally the upkeep and maintenance of the building – are run.

What are the options for managing leasehold property?

There are essentially three alternative arrangements for the management of leasehold property – typically, where leaseholders own dwellings in a single block of flats, sharing the costs involved in the management of common areas, maintenance of the exterior parts of the building and its roof and any amenities which are shared by all of the residents of the block:

  • traditionally, these management costs are the responsibility of the freehold owning landlord, who charges each leaseholder a proportion of the costs for such expenditure as maintenance and insurance – the arrangement is considered in greater detail by the Lease Advisory Service;
  • alternatively, the leaseholders may have entered into agreement to share ownership of the freehold and apportion those costs collectively;
  • a third way lies in the legal entitlement of the majority of leaseholders to form a Right to Manage company for the specific purpose of managing their common interests in the maintenance, repair and insurance of the building in which they all share an interest – but without their needing to own or share ownership of the freehold.

Why is Right to Manage insurance important?

  • one of the principal duties of any Right to Manage company formally set up by the relevant leaseholders is to ensure that the property is adequately insured – against such potentially major risks as fire, flooding, impacts (from vehicles or falling objects, such as trees and branches), escape of water, theft and vandalism;
  • when the leaseholders themselves assume the responsibilities otherwise taken on by their freeholding landlord, standard landlord insurance for the block of dwelling units is no longer sufficient or appropriate;
  • instead, purpose designed Right to Manage or RTM property insuranceis required in recognition of the responsibilities collectively assumed by the leaseholders themselves.

Why do leaseholders exercise their Right to Manage?

Probably the key motivation for leaseholders in taking over the responsibilities and obligations traditionally exercised by the freeholding landlord is the opportunity for cost saving. With their keener and more immediate interest in controlling management costs, leaseholders may argue that they may have greater concern in negotiating competitive rates for essential services such as repairs, maintenance and insurance.

Furthermore, with respect to RTM insurance, there may be features which leaseholders may secure which are otherwise absent from the cover arranged by the freeholding landlord.

One example, is the extension of cover to such features of individual dwelling units as the fitted bathrooms and kitchens – including built-in cupboards of leaseholders’ flats. This is a detail typically overlooked or absent from some buildings insurance cover arranged by the freeholding landlord.

Where can RTM insurance be bought?

Although there are quite detailed rules on the formation of Right to Manage companies – principally relating to the need for a majority of leaseholders to agree to the formation of such a company and to the landlord’s obligations in recognising such a company – specialist RTM insurance is readily available from specialist providers of such cover.

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