How to Resolve Disputes Over Building Insurance Charges

Disputes over building insurance charges are a common subset of leasehold service charge disagreements in England and Wales. Building insurance premiums are usually paid by leaseholders through the service charge to cover the cost of insuring the overall structure and communal areas of a block of flats or other leasehold property. Because these costs can be significant - and have been rising in recent years - disagreements often arise about whether the charges are lawful, reasonable or calculated in accordance with the lease. This guide explains your rights, the law, typical dispute scenarios, how to challenge charges, what forums are available for resolution, and practical steps you can consider.

What Are Building Insurance Charges?

In a leasehold property, the landlord (freeholder) usually arranges and pays the building insurance required by the lease and then recovers the cost from leaseholders through a proportionate share of the service charge. These insurance policies typically cover risks such as fire, flooding, subsidence and public liability. The amount each leaseholder pays should be set out in the lease itself and reflect a fair apportionment of the overall cost.

Why Do Disputes Over Insurance Charges Arise?

Leasehold disputes over building insurance commonly occur because:

• Leaseholders believe the premium is excessive or disproportionate to the level of cover provided.
• The landlord or managing agent adds extra fees or commissions to the insurance cost that are not transparent.
• Leaseholders are charged for insurance not specified in the lease or for cover beyond what is required.
• There is lack of information or documentation explaining how the insurance cost has been calculated.
• Long‑standing practices have developed that may not comply with the current lease terms or legal requirements.

Key Legal Principles

Reasonableness and the Landlord and Tenant Act 1985

Under the Landlord and Tenant Act 1985, any variable service charge - including building insurance premiums - must be reasonably incurred and represent costs which the landlord is entitled to recover under the lease. This “reasonableness test” applies whether the landlord arranges insurance directly or through a managing agent or broker.

If costs are not reasonably incurred, leaseholders can dispute them. The tribunal or court will examine whether the expenditure was necessary and whether any associated fees are transparent and justified.

Transparency and Information Rights

Leaseholders have statutory rights to access information about service charges, including insurance costs and related documentation. These rights include the ability to inspect accounts, receipts and policy documents after making a written request to the landlord.

New Protections Under Recent Law

Recent statutory reforms have introduced additional protections regarding insurance costs in service charges. For example, the Leasehold and Freehold Reform Act 2024 introduces provisions preventing certain “excluded insurance costs” - such as hidden broker fees or commissions - from being charged unless they fall within permitted categories. The Act also gives the First‑tier Tribunal powers to award damages where prohibited insurance costs have been paid by leaseholders.

Step‑by‑Step Guide to Resolving a Building Insurance Charge Dispute

1. Review Your Lease Carefully

The first step is to check the lease to understand:

• Whether building insurance costs are included in the service charge
• How the insurance premium should be apportioned among leaseholders
• Whether there are any restrictions on recoverable costs related to insurance

Only costs allowed by the lease can lawfully be recovered from leaseholders.

2. Request Information from the Landlord

If you have concerns about insurance costs, make a written request for:

• A breakdown of the insurance premium and how your share was calculated
• Copies of the actual insurance policy and schedule
• Invoices and receipts for the premium and any associated fees

The Landlord and Tenant Act 1985 provides rights to inspect accounts and insurance policy documentation, and tenants can take copies for their records.

3. Discuss the Matter with the Landlord or Managing Agent

Once you have relevant documentation, raise your concerns with the landlord:

• Ask them to explain any unusual or high costs
• Ask whether the policy was competitively tendered
• Challenge items that do not seem reasonably incurred under the lease terms

Often, landlords will clarify or correct errors without needing formal action.

4. Seek Independent Advice

You can obtain free guidance from the Leasehold Advisory Service (LEASE) or similar advisory bodies. They can help you understand whether the landlord is acting within their rights and whether your concerns have merit.

5. Mediation and Alternative Dispute Resolution (ADR)

If informal discussions do not resolve the dispute, mediation or ADR can provide a structured way to find a settlement. A mediator helps both sides identify issues and possible compromises. This process is confidential, usually cheaper and faster than tribunal or court proceedings.

6. Apply to the First‑tier Tribunal (Property Chamber)

If negotiation and ADR fail, you and/or other affected leaseholders can apply to the First‑tier Tribunal (Property Chamber) in England or the Leasehold Valuation Tribunal in Wales to resolve the dispute formally.

The tribunal can determine:

• Whether the insurance cost is payable under the lease
• Whether the amount is reasonable
• By whom and to whom it is payable
• Whether any alleged breach of information or consultation requirements has occurred

You do not need to have already paid the charge to make an application, provided you have not agreed or admitted liability in writing.

Where prohibited insurance costs have been charged under the 2024 Act provisions, the tribunal can order damages against the landlord or person who benefited from the prohibited payments.

Practical Considerations

Collective Action

A dispute is often stronger when leaseholders act together, especially in large buildings. Collective applications to the tribunal typically carry more weight and share costs among participants.

Withholding Payment

While it is possible in some cases to pay “under protest” or refuse to pay a charge that is improperly demanded, this should be approached carefully because non‑payment might lead to enforcement actions such as debt recovery or forfeiture. Keep copies of all correspondence and consult independent advice before withholding payment.

Ombudsman and Redress Schemes

If the dispute involves a managing agent, you may have recourse to property redress schemes such as The Property Ombudsman, which can investigate complaints and award compensation where appropriate.

Risks and Challenges

• Tribunal applications involve costs and fees, though leaseholders may pay less than in formal court proceedings.
• The landlord may claim legal costs, but recent reforms propose requiring tribunal or court approval for such recovery.
• A lease's wording may significantly affect your ability to challenge charges - unclear or unfavourable language can be difficult to overcome.

Common Questions from our Readers

Can I challenge insurance charges even if I have paid them?
Yes. You can challenge charges you have already paid if you have not admitted liability in writing. The tribunal can determine retrospectively whether the charge was payable and reasonable.

What if the landlord used a broker and commissions were added?
Under recent legislative changes, certain “excluded insurance costs” such as undisclosed commissions cannot be charged and may give rise to a tribunal claim for damages.

Do all leaseholders have to join a tribunal application?
No. Individuals can apply, but in multi‑flat buildings collective participation is often more effective.

Key Takeaways

Disputes over building insurance charges are common in leasehold properties. They usually arise when leaseholders believe that charges are unreasonable, not permitted by the lease, or lack transparency. Leaseholders have statutory rights to information and may pursue resolution through negotiation, ADR, redress schemes or by applying to the First‑tier Tribunal (Property Chamber). Recent legal reforms enhance protections against certain insurance costs and enable damages where prohibited charges are imposed. Understanding your lease, gathering evidence, and acting promptly improves the prospects of a fair resolution.