Right to Manage insurance is property insurance specifically intended for leaseholders who have come together to form their own Right to Manage company and need buildings insurance cover.
So, what is a Right to Manage company and why is specialist Right to Manage insurance required?
If you own the lease to your home in a block of flats – or if you are the landlord of such a flat which you let to tenants – you are almost certain to be charged a management fee or service charge to cover the costs of managing the common areas and grounds of the block, the exterior of the building and its roof, and any facilities collectively enjoyed by all residents of the premises.
As a publication by the Lease Advisory Service explains, these costs are typically met by the landlord – as the owner of the freehold of the entire block. In that case, the landlord recovers the cost in a charge made on each of the leaseholders.
It is also possible for the leaseholders collectively to own the freehold, with each one sharing in a part of it.
Right to Manage companies
A third possibility is that the leaseholders come together to manage the block and their common interests in its repair, maintenance and insurance themselves – effectively acting as though they were the landlord, but without actually owning the freehold.
This is done by way of the leaseholders exercising their Right to Manage.
The relevant legislation sets out a number of qualifying requirements for the type of building concerned and the leasehold arrangements within it, but at least half of the leaseholders need to come together to form what is called a Right to Manage company.
Right to Manage insurance
Just as any home owner is likely to have buildings insurance to protect the structure and fabric of their residence, and any landlord is likely to arrange buy to let insurance for similar purposes, the leaseholders forming a Right to Manage company also need insurance specifically designed to safeguard the building, communal areas and grounds for which it has become responsible.
That purpose designed insurance is known as Right to Manage insurance or Block of flats insurance and is a product in which we specialise here at UKinsuranceNET – indeed, we have written a detailed guide about the advantages of taking on responsibility for the management of a block of flats through a Right to Manage company which can be requested from our Right to Manage product page.
Under the conventional arrangements by which the freehold owning landlord assumed responsibility for management of the block, building insurance was generally bought by the landlord and its cost included in the management fee charged to the leaseholders.
If those responsibilities are instead taken over by a Right to Manage company, buildings insurance is clearly still required – but standard landlord insurance is no longer appropriate when the building is managed by the leaseholders themselves.
The landlord of course retains an interest in ensuring that the freehold he owns is adequately protected by suitable insurance, but this cover needs to recognise and reflect the changed circumstances of the building’s maintenance becoming the responsibility of a Right to Manage company.
It also gives the leaseholders the opportunity to arrange more cost-effective – and potentially cheaper – block buildings insurance than any which the landlord might have had in place.
In addition to any cost savings, there are also elements of cover which some Right to Manage insurance policies might include but which regular landlord or block of flats insurance policies do not. A case in point is the protection of fixtures and fittings in the building (including those in each leaseholder’s flat), such as fitted kitchens and bathrooms and built-in cupboards.
You may be reassured to know that the Right to Manage insurance policies arranged here at UKinsuranceNET include just such cover.