My service charge has almost trebled to £719 a quarter: Cladding-hit flat owner sees her block’s annual insurance premium soar from £34,000 to £500,000
- Flat owner see block’s buildings insurance rise from £34k to over £500k a year
- The rise in insurance costs is at a development affected by cladding issues
- The increases in the insurance costs are despite new fire alarms being installed
A landlord faces financial ruin due to having to pay her share of building insurance costs that have soared from £34,000 to more than £500,000 a year amid the cladding scandal.
Grandmother Julie Fraser, 59, bought the investment property – a two-bedroom flat in Cheshire – in 2016 with her life savings for £76,000 as part of her pension plans.
Five years on she faces a cladding repair bill that almost matches the price of the flat at £73,000.
But it is not the eye-watering repair bill that is causing the most immediate financial concern for Mrs Fraser.
Instead, it is the soaring quarterly service charge on the property – which includes the cost of her site’s building insurance – that has become unaffordable and is the most pressing financial issue.
Julie Fraser has seen the buildings insurance at her block of flats rise from £33,892 in 2019 to £514,000 in 2022
The soaring quarterly service charge on the property – which includes the cost of her site’s building insurance – has become unaffordable.
The buildings insurance has soared due to the property’s cladding issues, up from £33,892 in 2019 to £514,000 in 2022.
This is despite new fire alarms being installed at the site.
It has led to the service charges that she pays rising from £254 a quarter in 2019 to £719 a quarter in 2022.
Mrs Fraser lives five minutes from her investment flat, which is part of a development that has 288 homes on it.
Mrs Fraser bought her two-bed flat in 2016
Even though she rents out the property, she is responsible for paying the service charge. But she can no longer afford to pay.
She said: ‘I can’t afford to pay the £719 and face being in breach of the lease if I am unable to pay it.
‘I thought I was doing the right thing by investing in the flat. I’m now unable to work due to health issues and have been living off savings for the past two years. Those have now dried up.
‘The flat has no mortgage on it as I bought it with my life savings to help provide my pension. There are so many people in the same situation who are worried sick about these costs.’
LANDLORDS TO BE PROTECTED?
Leaseholders are not being treated equally when it comes to cladding costs, the the National Residential Landlords Association (NRLA) has warned.
When the housing secretary Michael Gove announced plans to force developers to pay for remedial action to tackle dangerous cladding on buildings between 11 and 18 metres high, he also argued that leaseholders should not be expected to foot the bill.
However, ministers have now admitted that they have yet to decide if buy-to-let landlords will be included within the scheme.
In a parliamentary answer, the Housing Minister Chris Pincher confirmed that those who sublet properties because they cannot sell them due to dangerous cladding will be included in the Government’s scheme. But he also stated that a decision about extending it to buy-to-let landlords has yet to be taken.
The NRLA is warning that the Government’s plans are not treating all leaseholders equally – and that they also risk delaying remedial work on dangerous cladding as the Government seeks to understand who may be an accidental or buy-to-let landlord.
Ben Beadle, of the National Residential Landlords Association, said: ‘It makes no sense to be treating leaseholders who are landlords so differently to owner-occupiers. Both groups have faced the same problems, and both should be treated equally. We are calling on the Government to rectify this injustice as a matter of urgency.’
Her comments come after Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, wrote to the Financial Conduct Authority asking it to review the buildings insurance market for multiple-occupancy residential buildings.
In the letter, Mr Gove wrote that ‘building insurance premiums have increased dramatically for almost all leaseholders in blocks of flats’.
It has responded, saying: ‘Although insurance premiums are just one aspect of the rising costs faced by residential leaseholders in the wake of the Grenfell tragedy, we want to ensure products provide fair value and premiums fairly and accurately reflect risk.
‘We are asking firms to consider what actions they can take to help leaseholders, whether individually or by identifying collective solutions as an industry.’
Since the Grenfell Tower fire in 2017, concerns about cladding have become a national issue
Mrs Fraser welcomed Gove’s recent intervention on cladding repair bills, in which he announced that leaseholders living in blocks under 18m would not have to pay their cladding repair bills.
She said: ‘I believe Michael Gove wants to make difference. He is listening and so far, he is doing what he said he would do.
‘I would like to think that next year will be more positive, and that our insurance premiums go down closer to where they were. Realistically, it would be good to get them down to £50,000.’