Freeholder Insurance

We’ve explained before the difference between leasehold and freehold, and how each is a completely different form of home ownership with different responsibilities, but we didn’t really delve into what insurance a freeholder needs.

First of all, let’s briefly recap what a freeholder is so that there can be no confusion.

A freeholder has ownership of a plot of land in perpetuity, as opposed to just leasing the building that’s built on it for a specified duration of time. Freeholders are free to do whatever they want on their land (in adherence to local regulations), and are responsible for the building insurance in addition to the maintenance of the land and property situated on it.

To put it simply: there is no “freeholder insurance”.

Freeholder insurance can, in theory, be used to mean anything from landlord insurance to shop insurance.

We often find that many people who are looking for freeholder insurance are actually searching for landlord insurance. They own the freehold of a property and are looking to let said property to tenants – who can be friends, family or otherwise. As the owner of both the land and property, you are free to sell your property as leasehold, use it as your first or secondary home, or let it to tenants of your own choosing. Landlord insurance doesn’t necessarily have to mean the whole package. You can choose the level of cover that you require and skip out the bits that you don’t, depending on your own situation.

If you allow others to live in your property in exchange for money (by lease or by let) then you will need landlord’s insurance – even if you don’t consider yourself to be a “landlord”. Consider leaseholders as being long-term tenants. If you lease property to a leasehold landlord, you will still need to purchase the building insurance yourself. You are the landlord to the leaseholder, and they are the landlord to their tenants.

Freeholder insurance for landlords has also become confused with “block of flats insurance” despite, again, the fact that leaseholders may own a block of flats and let each flat out separately themselves. Or, quite commonly, you own the freehold to the block of flats but each contained flat was sold to leaseholders, who are then renting out to subtenants and collecting money from them. Though you may have very little – or nothing at all – to do with the daily operation of the block of flats, you are still responsible for purchasing the landlord’s building insurance. This policy can be obtained completely separately from any other landlord’s insurance policies which the leaseholder will be responsible for.

However, if you are both the owner and occupier then you will not need landlord insurance, but rather standard home insurance. Your home insurance should cover both the structure and its contents within.

As the freeholder, you are responsible for insuring the bricks and mortar. Regardless of who manages or occupies the property. Basic freeholder’s insurance does not cover landlord’s liability, which the leasehold landlord (if there is one), may be made responsible for if the freeholder does not want to include it in their own freeholder’s insurance package.

The freeholder’s insurance cost is legally allowed to be re-distributed between the property’s tenants through the ground rent or annual charges, but it is still the freeholder who has to arrange the insurance.

Read our article on insurance for mixed use property if your building contains both residential and commercial elements.

4 Responses to What is Freeholder Insurance?
  1. I bought a leasehold flat, one of two in a converted property. The ground floor is a two bedroomed flat, rented out by the freeholder and I live in the two bedroomed flat above. The building insurance taken out by the freeholder is for a four bedroomed house. Is this legal or indeed adequate?

    • Insuring as a normal 4 bedroom house when it is a house separated into two self-contained flats could well invalidate the insurance. It is imperative to make sure the correct property type and occupancy of the property has been declared to the insurance provider. It would only be the insurance provider themselves that can answer your question so contacting them immediately would be the best thing to do.

  2. We have recently become freeholders for an old Victorian house which has been converted to three flats. We own one flat and the other two are owned by third parties under a 99 year lease arrangement. We understand we are responsible for insuring the whole building (excluding contents). There is currently a ‘Landlord Insurance’policy in place but it refers to the occupants of the other flats as tenants. This doesn’t seem correct. Should we have some specialist ‘Freeholder’ insurance in place instead or is Landlord insurance the same thing?

    • We would put something like this on a “landlord insurance” policy but there are two important questions that would need to be answered correctly. Firstly, the occupancy of the property should say it is lived in by the Leaseholders and secondly it should say the lease agreement with the occupants is a Long-term lease agreement (99yr or equivalent). You will need to check your Statement of Fact or Proposal Form to clarify the information you have given them. If you are still unsure, you should speak to your insurer to clarify.


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