Running a right to manage company
Buildings insurance
The right to manage company will need to make sure that buildings insurance is in place at handover.
This can be difficult because there may be no service charge funds available to pay the premium. Managing agents will not want to take on liability for the potential debt if that would be in breach of their own obligations.
Leaseholders may already have paid an insurance premium through the service charge for the same year and may be unwilling to pay again.
Think about the timing of the handover, and plan ahead. Arrangements will be simpler if you can take over at the beginning of a new service charge or insurance year.
If you are not taking over the existing policy mid-term, the freeholder is free to cancel the policy. They may be entitled to a partial refund of the premium which should be returned to the service charge fund. But check the policy terms first, as the insurer may refuse to do this if there have been claims on the policy or if it is for specialist cover such as terrorism.
What needs to be insured?
You may need:
- a buildings insurance policy – this covers the building and grounds from risks such as fire, escapes of water, storm and subsidence, and is also likely to cover occupiers’ liability, and employer’s liability if the company employs staff
- a terrorism policy – this is a specialist policy to cover explosion or terrorist activity that might damage the building
- an engineering policy (sometimes known as a plant protection policy) – if you have lifts, boilers or plant rooms
Contents of flats are the responsibility of individual occupiers, whether tenants or leaseholders. Buy-to-let owners will likely want their own landlord insurance policy.
You should also take out directors’ and officers’ insurance to protect the directors.
Arranging cover and cost
Larger landlords (freeholders) will usually have a block insurance policy covering several properties in their portfolio. This means they have better bargaining power and are lower risk because of the number of properties covered.
A right to manage company with a single building will not have the same advantage and you may be quoted a much higher premium. There may be ways to reduce the premium, for example:
- your managing agent may be able to arrange a block policy for properties they manage
- you can agree a higher excess for claims such as escape of water to reduce the premium
- you may be able to take over the landlord’s previous policy if the insurer agrees – this may be particularly useful if you are taking over mid-year as it avoids paying an extra premium in the same year
You can use your rights to get information from the landlord to help with arranging buildings insurance.
Water leaks
Water leaks are by far the most common claim on buildings insurance for blocks of flats. Showers, baths, pipework, radiators and washing machines are the main sources of leak claims.
Most comprehensive buildings insurance policies will include cover for leaks between or within flats. The claim history of the building will affect the premium so it’s important to be aware of this risk and reduce it as much as possible, for example by educating tenants and leaseholders about maintenance.
If you have a roof, particularly a flat roof, you may also need to deal with claims of water leaks from rain. It’s important to maintain the roof to reduce claims.
Insurance claims can take several months to settle. There is likely to be an excess on the policy, which could range from £500 to £2,500 or more. You need to check liability and if the excess should be paid by a particular leaseholder who is responsible for the leak, or covered by the general service charge fund. You need to check the lease terms to see how insurance claims should be managed.
Read more about water leaks in leasehold flats.
Emergencies and out of hours calls
You need to plan for what to do if disasters happen, especially on weekends, at night and on bank holidays when no site staff or property managers are available. You need to decide if you (as directors) are going to be the emergency contact or whether to use a service for this.
For a small block it may be enough to have a 24 hour plumber, locksmith and glazier on the books. For a larger block the managing agent should arrange 24 hour cover, or you could make arrangements with a supplier yourself.
Serious leaks that endanger life can be dealt with by the fire brigade in an emergency, for example if they could damage electrical or gas installations and cause a fire or gas leak.
- Last updated:
- 16 December 2025
- Next review:
- 16 December 2027
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