Common building insurance

You are obliged by law to have adequate common insurance. This is to cover your share of the costs of major and expensive damage to your building. You need to insure your building for a reinstatement value that could be more than the sale value. Many tenement and apartment blocks carry a block insurance policy which all owners pay for jointly.

Why do we need insurance?

If you do not have insurance, you will need to pay the cost of any damage to your property from your own funds, even if it is not your fault.

If there is a fire, then all flat owners in a tenement block will be required to share the cost of rebuilding. The Fire Protection Association has claimed the cost of a tenement fire is over £370,000. You cannot rebuild just part of a block of flats so if one owner is uninsured, or underinsured, there are major problems for every owner. 

The uninsured owner could lose their home. The value of their flat following a fire could be less than they paid for it and they would still have obligations to pay for the fire damage to the common property.  Other owners could be left living in temporary accommodation and paying rent as well as mortgage for months if not years.

Common insurance – legal obligations

Decisions about common insurance are normally majority decisions (but check your Title Deeds).

It is a legal obligation under the Tenements Act for all flat owners to carry common insurance.  (The only exception to this would be where it proves impossible to insure your building.)

If you have a mortgage, its terms will require you to carry adequate insurance.

If you don't have a block insurance, you can be required, on 14 days notice,  to show your co-owners evidence that you have sufficient common buildings insurance.

What if someone doesn't have common insurance?

If owners can't show you proof that they have adequate common insurance cover, you can take legal action to ask the Sheriff to order your co-owner to take out insurance.  

Legal reference

s18 Tenements (Scotland) Act 2004

More information

Taking Legal Action

What types of insurance are there?

You can choose between two different ways of insuring your building:

  • Block or Common Insurance – this generally refers to building insurance which covers every owner in a tenement or block of flats or estate. It sometimes also refers to a top up policy to your own individual buildings insurance.
  • Individual building insurance - this must also cover the common areas of your building.

These are not the same as Contents Insurance – which covers your own personal possessions and furniture - or Landlords Insurance.  Ideally you will have both buildings and contents insurance.

How much cover do you need?

Check your Title Deeds to see what they say about your common insurance obligations.

How to value your building for insurance?

You can get a rough idea of rebuilding costs by using the Building Cost Information Service.  This is a very basic service which does not cover any properties built before 1946 or any listed property.  But treat it as a call for action if the reinstatement value given there is substantially different from what you are currently insured for.

Ideally you should have a Building Reinstatement Valuation to ascertain the costs of completely rebuilding your property. These valuations must be carried out by a RICS qualified surveyor and are recommended every 3-5 years as the costs of building materials and necessary expertise change. The cost of this survey could be around £50 per owner but this will depend on the size and number of owners in your building.

This valuation can be updated annually using the BCIS Rebuilding Cost Index.    (The cost index for Oct 2015, showed rebuilding costs had increased by 4.5% over the previous year, more than the rate of inflation).

What if we are under or over-insured?

If you need to partially repair or rebuild, and you are under-insured, your claim will be averaged.  This means that you will only get a fraction of the insurance claim.  If you have insured your building for £1M but your reinstatement value should have been £1.5M, you will only get paid two thirds of your claim. There is no benefit in being over-insured, you can still only claim for what you’ve actually paid after exclusions.

Should we go for a series of individual policies or one “block” policy?

Firstly, check your title deeds – these may require you to have a block policy. You also need to check with your lender – the majority will allow you to opt for a good block policy.

If you’ve truly got a choice, then check that you can indeed get a block policy. You may need to go through a broker.

After that, you will want to compare costs and benefits.

Individual insurance policies may offer a lower headline premium through introductory offers however you need to check policy conditions carefully

  • Is everything covered? You need to do your homework carefully each time you renew or change a policy to check all the small print for exclusions – it’s known for some insurance policies to exclude cover for plumbing leaks unless you carry both contents and building insurance.  That kind of insurance may not meet your needs in an emergency.
  • If you have got an introductory offer, you will need to shop round every year to keep getting low rates an you will need to check the policy carefully every time for exclusions etc.
  • The cost of insurance may be cheaper for individuals who have had no claims but could be considerably higher if there has been a previous claim in the block.
  • You also need to make sure you are insuring your property for the right value.  Your insurance premium is based on the rebuilding cost of your property.  In some areas, and especially with stone buildings, the rebuilding cost can be much more than the purchase cost of a flat. If you are underinsured then you will only get a proportion of any claim.
  • If you know that other owners don’t have adequate insurance cover, you are obliged to inform your own insurer as this is a “material consideration” and could affect the premium charged and any claims if not mentioned.

With a block policy, you may be able to make savings by being able to make a single claim for an insurable event and only pay one excess.  If you have individual policies, you will all have to pay an excess each time you claim for a common property problem. (Note, if you obliged to have a block policy, you may be able to opt for a lower premium in exchange for an agreement that every owner claims individually and each pays the agreed excess.

A distinct advantage of having a block policy is that don’t need to check every year that your co-owners are carrying enough private insurance. Under the Tenements Act 2004, each year, co-owners need to give evidence to each other that they currently hold adequate building insurance and undertake to keep that policy in force.

On the downside, premiums for block policies tend to be higher than for individual houses. This is because In a house with no common parts, a water leak or other damage will only affect the one property. In a block, damage can affect many of the flats. So premiums trend to be higher in flats than in houses of the same value.

Once you have a block policy set up, you may have problems if one owner refuses to pay their share of the premium – co-owners may need to pick up their share.

If your Title Deeds do not require a common policy, the Tenements (Scotland) Act 2004 enables a majority of homeowners to agree to have one and all homeowners would have to contribute to it.

Making a Claim

Many insurers use claims consultants to handle cases.  If you have difficulty over a claim, you can also use a claims consultant but you will be charged a fee which is likely to be a percentage of the final claim.  If you have several policies covering your block, a claims consultant may help with negotiations with all the owners’ insurance companies.

What type of problems can and can't you claim for?

Your premium will be affected  (partly) by the excess you choose. The excess is the amount you pay yourselves before your insurance comes in to play. A high excess will lead to lower premiums but you may have to cover a number of small problems from your own funds.

What does buildings insurance cover?

A typical All Risks policy will give you cover over

  • fire, lightning, explosion and smoke
  • storm damage, flood, escape of water
  • theft &  attempted theft, malicious damage
  • impact and accidental damage
  • subsidence, ground heave & landslip
  • third party liability / Property Owners Liability

It will typically exclude damage caused by:

  • frost
  • wear and tear, gradual deterioration
  • latent defects
  • problems caused by major structural alterations
  • defective  design or workmanship, use of defective materials
  • asbestos

So if you don’t keep your property repaired, or use poor trades firms, your insurance may not cover you.

You may need to opt in to some these types of cover and check any specific exclusions:

  • Material Damage
  • Escape of  Utilities
  • Breakage & Collapse of Aerials  
  • Removal of Trees and  Branches that are a threat to life
  • Carpets of Common Parts
  • Fly Tipping Removal Costs
  • Damage to Fixed Glass and Sanitary Wear
  • Alternative accommodation

Lift insurance

You may also be able to get specific cover for your lift.

Why are my common buildings insurance premiums going up?

Insurance premium costs (2018) have gone up for every homeowner – industry sources quote average price rises three times the rate of inflation.  So why is this happening?  There are a number of reasons:

  • An increase in Insurance Premium Tax – this has been steadily increased by the government,  from 2.5% at introduction in 1997 to 10% in 2016, and since has gone to 12%.
  • An overall increase in inflation affecting building (and claims) costs referred to as index linking.
  • The weak pound has led to rises in the cost of imported building materials which means repairs are more costly.
  • Climate change with the greater likelihood of severe weather causing damage to buildings.
  • Claims relating to water leak damage have also increased as more households install extra bathrooms and wet rooms.

Some buildings may also see additional increases due to their claims history. You should also check every year whether the insurers have changed their terms to keep premiums down – they may alter the level of excess paid or insist that each owner makes an individual claims and each pays the excess.

Insurance through your Factor Q & As