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What is Right to Manage insurance?

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If you are the owner of leasehold property – or, indeed, the owner of its freehold – it is essential to understand the Right to Manage.

Right to Manage

The Association of Residential Managing Agents (ARMA) explains that the Right to Manage was given effect by the Commonhold and Leasehold Reform Act 2002 and gives leaseholders the right to form their own company to take over the management of property owned by their landlord.

The management of such property – which might be a purpose-built block or a building converted into independent leasehold flats – typically covers matters such as:

  • the maintenance of common areas – such as lobbies, staircases outside spaces and gardens;
  • maintenance and repairs to the exterior of the property; and
  • annual insurance for the building and commonly-owned contents against such significant risks as fire, flooding, storm damage, impacts (from vehicles or falling objects, from aircraft to trees and branches), vandalism and theft.

Conventionally, responsibility for those management duties fell to the landlord and owner of the freehold, who passed on the cost through an annual charge to the respective leaseholders. With decisions made by the freeholder, many leaseholders may have been frustrated by the absence of any say in the expenditure on such matters as maintenance and insurance – hence the freedom given by the Right to Manage.

Although the Right to Manage may confer welcome freedoms for leaseholders, however, the duties and responsibilities that come with it are onerous and not to be undertaken lightly, explains the official Lease Advisory Service.

Right to Manage insurance 

Perhaps the most onerous responsibility to fall to any Right to Manage company established by the leaseholders is insurance of the property. It is not only a question of securing the cheapest possible form of cover but also identifying the most suitable and appropriate protection for the building in question – taking into account its age, size, location and other specific risks.

As we explain in our free guide, standard insurance policies for blocks of flats are unlikely to provide the security and protection required by leaseholders when they take on responsibility for making these arrangements. Instead, specialist Right to Manage insurance is needed to ensure that full account is taken of: 

  • the additional risks posed by any building accommodating more than one household – in contrast to, say, a conventional, owner-occupied home; 
  • the communal areas – hallways, staircases, gardens and outbuildings – that may make up a building containing multiple leasehold units; and 
  • the potentially much higher cost of repairing or reinstating damage to a block of flats or converted building containing several leasehold dwellings, compared to a conventional house or bungalow.

Any company set up by leaseholders to assume the management of the building and the communal areas they occupy therefore needs to be sure that the insurance cover is suitable for the exercise of their Right to Manage responsibilities.

Unless specialist Right to Manage insurance is in place, the leaseholders may discover to their cost that any other type of cover that has been arranged is declared invalid in the event of a claim being made. 

At UKinsuranceNET, we are specialists in the provision of Right to Manage insurance. If you have any questions, please feel free to call us on 01325 346 328

– we will be more than happy to help.