Do You Need Insurance for a Commonhold Property?

When purchasing a property in the UK, most buyers are familiar with the traditional freehold and leasehold ownership structures. However, commonhold is an alternative system that offers owners greater control and independence over their properties. However, while commonhold properties eliminate some of the complications of leasehold, insurance remains a key consideration for owners, landlords, and residents alike.

In this article, we explore the insurance needs of commonhold property owners, what cover is required, and how it compares to standard leasehold or freehold insurance policies.

Understanding Commonhold Properties

Commonhold is a relatively new form of property ownership in England and Wales, introduced under the Commonhold and Leasehold Reform Act 2002. It allows multiple owners within a shared development, such as a block of flats, to own their unit outright while collectively managing the common areas through a Commonhold Association (CA). Unlike leaseholds, there is no time limit on ownership, meaning property owners are not bound by expiring leases. While this structure removes some of the complexities of lease agreements, it also introduces unique responsibilities, particularly when it comes to insurance.

What Insurance Do You Need for a Commonhold Property?

Unlike leasehold properties where the freeholder typically arranges buildings insurance, commonhold property owners must ensure that their shared and individual risks are covered appropriately. This can mean having a communal policy to cover communal areas, and individual policies to cover your own property within the overall building, including where property is being rented out via Landlord Insurance. Here are the key types of insurance to consider:

Commonhold Association Insurance (Buildings Insurance)

The Commonhold Association is responsible for maintaining and managing the shared aspects of the property, such as hallways, roofs, lifts, and communal gardens. To cover potential risks, the CA must arrange a buildings insurance policy that protects the entire structure from:

Fire, flood, and storm damage
Structural issues
Vandalism and accidental damage

Each unit owner contributes to the cost of this insurance through their service charges. If you own a commonhold unit, it’s essential to check that the association has an adequate policy in place and that you’re aware of what it covers.

Contents Insurance for Individual Unit Owners

While the CA’s buildings insurance protects the structure, it does not cover the personal belongings inside your property. As a commonhold unit owner, you should take out contents insurance to cover:

Furniture and appliances
Electronics
Personal possessions
Accidental damage
Theft and fire-related losses

Landlord Insurance for Buy-to-Let Commonhold Owners

If you own a commonhold property and rent it out, standard buildings insurance won’t be enough to protect your investment. A landlord insurance policy can provide additional cover and additional peace of mind, including:

Loss of rent cover – if your property becomes uninhabitable due to damage
Legal expenses insurance – in case of disputes with tenants
Landlord liability insurance – to protect against injury claims from tenants or visitors

Liability Insurance for Commonhold Associations

The Commonhold Association should also consider public liability insurance to cover accidents occurring in communal areas. This can cover residents, visitors and other guests or members of the public in case of injury or illness. Examples could include:

A visitor slipping on a wet floor in the shared entranceway
An injury caused by a falling object from a communal balcony
Illness due to poor upkeep of communal areas

Common Insurance Pitfalls for Commonhold Owners

Without adequate liability insurance, the Commonhold Association and unit owners could face costly legal claims. Accidents and damage happen, even with proper attention to risk management and health and safety, and having the wrong or no insurance at all can lead to financial and sometimes legal issues. There are a few common insurance pitfalls that can commonly cause issues if not managed properly, including:

Assuming the Commonhold Association Has Adequate Cover – Always verify the CA’s insurance policy details and ensure it meets legal and financial requirements.
Neglecting Contents Insurance – The CA’s insurance won’t cover your belongings, so taking out a separate policy is essential.
Overlooking Landlord-Specific Insurance – If you let out your property, ensure you have specialist landlord cover.
Not Checking for Liability Protection – If someone is injured in a communal area, liability insurance is crucial to protect owners from legal claims.