The September 2022 report by the Financial Conduct Authority has shone a spotlight on the lack of control that leaseholders have in determining their buildings insurance and the commission that is paid thereon. As the report highlights, there is a lack of transparency, and it is worrying that many leaseholders are not even aware that these commissions exist at all.
The most shocking finding of the FCA report was that it's common practice for freeholders to share a comission with their broker, which can be as high as 60%. A cost which is passed directly onto the leaseholders. Put simply, the findings state that it is commonplace for brokers to share commissions of up to 62% with managing agents. Unsurprisingly, the report finds that this creates a situation where not all managing agents are motivated to act in the best interests of the leaseholders who ultimately pay for the insurance.
While not all leaseholders are faced with this situation, there is another way for them to end up paying more than they should for their building insurance. The Leasehold Knowledge Partnership, a well-known leaseholder advocacy group, recently identified a number of large building managers with their own in-house insurance companies that are highly profitable. Some making profits of 40%. In this case, there may be no comission, but the leaseholder is still paying a huge profit margin for the benefit of the building manager. Again, the likelihood of the building manager to act in the best interests of the leaseholder is not likely to be as high as it should.
The only way to really stop it is for leaseholders to take control of their building. With Right to Manage (RTM) the insurance company would quote directly to the RTM company set up by the leaseholders to manage their own building. Any savings would go to the leaseholder and not the freeholder or their building manager. With right to manage the leaseholders get control of their building and its costs, putting an end to any hidden costs they have been burdened with. With control over their building, they can negotiate contracts with builders, insurers, and other service providers, giving them a voice where they had none before.
The mi-blox RTM bot will tell you whether your flat, and its building, is eligible for Right to Manage without having to sign up for anything. Quick and easy. Give it a try.