Building Insurance for Flats: The Freeholder's Guide

Building Insurance for Flats: The Freeholder's Guide

If you are the freeholder of a building converted into flats or a purpose-built block, building insurance for flats is your direct responsibility. The lease holds you accountable for keeping the structure insured on behalf of all leaseholders, and the cost is recovered through the service charge. This guide explains what a freeholder needs from a flats buildings policy, how cover differs from standard home insurance, and the practical steps to take before renewal.

Why the Freeholder Holds the Policy

In a block of flats, individual leaseholders own a long lease on their unit but do not own the building itself. The building, communal areas and structural elements remain the property of the freeholder. Because no leaseholder can individually insure the structure they do not own, the lease assigns this duty to the freeholder. The freeholder takes out a single buildings policy covering the whole block and recovers the cost proportionally through the service charge. This is sometimes called a block buildings policy or block of flats insurance.

What the Policy Should Cover

A proper freeholder buildings policy on a block of flats should cover, as a minimum:

• The full structure of the building — walls, roof, floors and foundations
• Communal areas: entrance halls, staircases, landings, lifts, corridors
• Fixed installations: pipes, wiring, central heating, communal boilers and tanks
• Outbuildings, boundary walls, fences, gates, paths and shared gardens
• Standard perils: fire, lightning, explosion, storm, flood, escape of water, theft, vandalism, subsidence, heave and landslip
• Property owners' liability of at least £2 million
• Loss of rent and alternative accommodation cover
• Employers' liability if any staff are employed, including part-time cleaners or caretakers

How It Differs From Home Insurance

It is tempting to assume that ordinary home insurance can be extended to cover a block of flats. It cannot. Home insurance is designed for owner-occupiers of a single dwelling and does not contemplate the legal relationships, communal areas, or multi-occupancy use that a block of flats involves. Specialist freeholder buildings insurance differs in several important ways:

• Cover is written on a buildings only basis — leaseholders insure their own contents
• Property owners' liability is built in at higher limits to reflect the risk to multiple residents and visitors
• Loss of rent cover is included as standard, reflecting that the freeholder collects ground rent and service charge
• The policy is designed to respond to a service-charge-based claims process where multiple leaseholders may be affected

Setting the Sum Insured for a Block of Flats

For a block of flats, the sum insured must reflect the cost of rebuilding the entire structure from scratch — not the combined market value of the flats. Market value tends to be considerably higher than reinstatement cost because it includes the value of the land and location, neither of which need to be rebuilt after an insured event. Underinsurance in a block of flats is particularly damaging because every leaseholder is affected proportionally. A current RICS Reinstatement Cost Assessment is the safe way to set this figure.

Communal Plant and Shared Equipment

One of the features that sets a block of flats apart is the presence of communal plant — lifts, communal boilers, door entry systems, smoke vents, fire panels and shared water tanks. The cost of replacing a communal boiler or lift after a serious incident is substantial and falls on the freeholder. Make sure the policy schedule lists communal plant explicitly, and consider engineering inspection cover where lifts, boilers or pressure systems require statutory examination.

Disclosing the Policy to Leaseholders

Under section 30A of the Landlord and Tenant Act 1985, leaseholders have a statutory right to request a written summary of the insurance cover, and to inspect the policy documents in person. Many freeholders pre-empt this by circulating a summary of cover each year alongside the service-charge demand. Doing so reduces friction and demonstrates that you are taking your obligations seriously.

Buildings Insurance and the Building Safety Act

For higher-risk buildings — generally those of 18 metres or seven storeys and above, or containing two or more residential units in some cases — the Building Safety Act 2022 has introduced additional duties on the freeholder as the principal accountable person. Your buildings insurance should be reviewed in the context of these duties, including how the policy responds to remediation works and any pre-existing issues identified under the new regime.

Working With a Specialist

Most freeholders find that placing the policy through a specialist broker delivers better cover at a similar or lower price than going direct. A specialist will know the small number of insurers who genuinely write flats business, understand the interaction with the lease, and present a like-for-like comparison of cover levels. For further reading, see our pages on buildings insurance for flats and joint freeholder building insurance.

Get a Fast Quote for Flats Buildings Insurance

We arrange specialist building insurance for flats on behalf of freeholders, residents' management companies, and right-to-manage companies. Get A FAST Quote today and have specialist cover in place that meets your obligations and protects everyone in the block.