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”.
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.