Insurance Premiums and Service Charges – when does an insurance premium become ‘unreasonable’?
A recent case, Cos Services Limited v Nicholson and Williams [2017] UK UT389 (LC) has looks at the question of insurance premiums and whether these are ‘reasonably incurred’ within the meaning of the service charge legislation.
The case is potentially good news for those looking to challenge their insurance premiums.
Generally, the FTT will not look in too much detail at the amount been charged in respect of an insurance premium provided that the Lease allows the Landlord to insure.
It is certainly not the case that the Landlord is generally bound to choose the cheapest insurer that is available.
The case is interesting as it shows a willingness to widen the scope of interpretation of Section 19 (1) of the Landlord and Tenant Act 1985 to include the amount paid by way of a premium for an insurance policy, particularly when as in the particular case the tenant was able to produce evidence of comparable premiums that were some £10,000.00 cheaper.
Where properties are in multiple ownership, it is not uncommon for the Landlord to place a block policy and to allocate the costs of obtaining such cover to the particular blocks under management. The case shows that the Landlord needs to consider the level of premium that is going to be charged against other equivalent quotes obtained in the market.
Although in each case the facts will need to bear out the argument being made, this does show a willingness on the part of the Upper Tribunal to encourage the First Tier Tribunal to look more closely at whether insurance costs have been reasonably incurred.
Clearly, if the discrepancy is not as extreme as was shown on the facts in this case then the scope for redress will be reduced.
However, this case may well cause flat owners to consider having an independent review of the likely cost of obtaining cover and putting this to the landlord and in appropriate cases bringing a challenge in the First Tier Tribunal.
Mark Chick
14 November2017