Category Archives: Home owner information

Various advice from industry professionals and guest contributors on mortgages, insurance and other property-related matters.

Residents’ Management or Body Corporate Insurance: UK vs Australia

If you’ve owned apartments in Australia and UK, it probably won’t take you long to realise that there are some surprising differences between how the two nations handle management company responsibilities. And one of the most important of these is insurance.

Back to basics

Both Australia and Britain have seen a surge in apartment buildings in recent years, but their ownership and management systems are quite distinct from each other. In Australia, a ‘body corporate’ will own the land, common areas and building fabric, whereas individual unit owners hold something called an strata title over their apartment, rather than a lease arrangement with the building owners. The title is open-ended with no termination date, and strata title owners automatically become members of the body corporate, which in turn is run by an elected management committee.

In England and Wales, most apartment owners have a lease agreement with the overall freehold owner of the building. However, only those leaseholders who are also lucky enough to have a ‘share of freehold’ are likely to be members or part-owners of the building’s management company. From these members, the directors are selected or appointed.

Despite these differences, one thing that both countries have in place is compulsory insurance for buildings. Unfortunately, at least in regards to insurance, that’s about as far as the similarities go.

Insurance for multi-resident properties

In the UK, the property insurance scene can be a bit of a minefield. Many property insurers are happy to cover buildings and common areas, and even public liability and property damage, but that’s their limit. If the directors of a residents’ management company want legal defence cover or officers’ liability cover, then they’ll need to search elsewhere, and while standard policies for both can be relatively easy to find, not all policies can be tailored to cover property management issues. And as any director of a residents’ management company will tell you, there are a lot of issues decided upon each year, many of which could end up being contentious or even in court.

The scenario in Australia is very different. There, specialist strata insurers such as Flex Insurance, readily bring everything under one policy through a combination of standard inclusions and optional extras. A management committee could, on top of its basic building and public liability insurance (which are compulsory in all states), choose to add on office-bearers’ liability cover, as well as fidelity guarantee against fraud, legal defence insurance, even workers and volunteer injury cover – all wrapped up in the one policy.

Is directors’ liability cover really that important?

In a word, yes. Without directors’ cover, the office bearers of the management company can be held personally liable if an aggrieved party thinks that a director or committee have not exercised due care when making a decision, and that decision has led to loss or injury. Directors’ and officers’ insurance (often shortened to D&O Insurance) can protect individuals against claims for negligence, mismanagement, breach of duty, trust or care, and even errors and omissions.

It is possible for a residents’ management company to be wound-up, to limit personal liability if it was sued, but this in itself brings its own hassles and risks. That’s why, having D&O cover makes sense.

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New Homes Ombudsman should be set up – An APPG Inquiry Recommendation

In his speech at the JCT Parliamentary Reception on 17 May 2016, APPG EBE chair Oliver Colvile MP highlighted the main findings of the Inquiry and some of the main recommendations, in particular that a New Homes Ombudsman “should be set up.” stating “this would mediate disputes between consumers and their builders or warranty providers to offer a quick resolution.”

It is to be hoped that this and all the recommendations in the Inquiry Report, due for publication at the beginning of June 2016, will be taken forward and fully implemented by Government at the earliest possible opportunity.

Official Ombudsman

Houses of ParliamentAn Ombudsman is usually appointed by the government or by parliament, but with a significant degree of independence. They are charged with representing the interests of the public investigating and addressing complaints against public bodies, private companies, organisations and sometimes entire industries. An ombudsman should be a totally independent body capable of investigating complaints of malpractice, maladministration or a violation of rights, both fairly and impartially.

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Preliminary announcement of findings and recommendations of the APPG Inquiry into the Quality of New Build Housing in England

The waiting is nearly over.   Its official!  The New Home Ombudsman is coming! A culmination of two years’ campaigning and ten years dedicated work highlighting the plight of UK new homebuyers.

I spoke. They listened!

The APPG Inquiry report is being finalised and is due for publication in “at the beginning of June 2016.”

APPG Announcment 1On Tuesday 17 May 2016, chair Oliver Colvile MP made a speech at the JCT Parliamentary Reception highlighting the findings and the main recommendations.

He said that he, and “many of his Parliamentary colleagues across the country have had new homebuyers coming to their MP’s surgeries to complain about the way their new home was built. Although the report hasn’t been finalised, I can confirm that the Inquiry Committee has agreed on a number of recommendations and I would like to share a few of those with you”

  1. A New Homes Ombudsman should be set up. This would mediate disputes between consumers and their builders or warranty providers to offer a quick resolution procedure.
  2. Standardised house building sales contracts should be enforced, meaning uncertainty surrounding bespoke builders’ contracts would be removed.
  3. There should be a mandatory right for buyers to inspect and, should they wish, carry out a full survey prior to financial completion. More details of this particular point will be announced in the final report.
  4. To improve transparency, builders should be required to provide homebuyers with a comprehensive information pack. This would include plain English explanations so that homebuyers can understand exactly what they are buying.”

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Flood victims are still waiting for insurers to pay their claims

Is insurance just for peace of mind?

Most people realise how important it is to insure their home and possessions as a safeguard against their worst nightmares becoming a reality. Be it burglary, storm damage, fire or flooding, virtually everyone has insurance which enables them to sleep at night, not worrying about being left out of pocket or with nothing after a major disaster.

Or so you would think. But as keen as the industry is to collect premiums from you, things are quite different when an insurer has to pay a claim. Even a simple small claim such as a handbag loss can result in a disputed claim requiring proof of original costs (receipts) and police crime number etc. Even when the claim is eventually paid (ours took over a month) the following years premium increased by over 30%.

Flood 1So it is hardly a surprise that this grubby industry is dragging its heels in settling claims from those flooded in January. This, despite the Prime Minister David Cameron saying on national television that he was “putting insurers on notice that they needed to pay up the money fast” So how can it be that, according to the Association of British Insurers, 7,480 householders, that is 40% of those who made a claim for flood damage this year, are still waiting to be compensated by their insurer? The ABI figures also highlight that 2,600 will still be waiting at Christmas! Around a 100 families on the Somerset Levels are still in temporary accommodation, often living in caravans.

The ABI says it does not know the exact number of people living in temporary accommodation and insurers say not all outstanding claims are disputed and think that 85% of the flood claims submitted will be settled before the New Year. That would still leave 15% (nearly a sixth) who are still waiting!

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FREE cavity insulation for 9 in 10 homeowners

Save energy this winter by getting your home insulated for FREE!

Great news for UK home owners as British Gas says “nine out of ten will be able to get loft and cavity wall insulation for free” as part of the Energy Company Obligation (ECO). No  you don’t have to be on benefits, over 60, or have minimal savings to qualify! 

Most of the big six energy providers are giving free boilers, plus loft and cavity wall insulation, to some people who get tax credits and have an income of £15,860 or less, or are receiving certain benefits such as pension credit. But British Gas is giving away FREE loft and cavity wall insulation to anyone with a suitable home – you don’t need to meet any benefit criteria – you don’t even have to be a British Gas customer!  See British Gas Free Cavity Wall Insulation 

That’s right it’s completely free – nothing to pay at all, ever! Unlike the extensively promoted Green Deal, designed to help people make energy efficiency improvements to buildings by allowing them to spread the costs through their lower energy bills over several years, rather than paying 100% in advance of energy savings. 

So how can it be free?

Heat loss in a house

Where the heat is lost

The Energy Company Obligation (ECO) is an energy efficiency programme that was introduced in the UK in early 2013, replacing the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP). ECO places legal obligations on the larger energy suppliers to deliver energy efficiency measures to domestic energy users. It operates alongside the Green Deal and the big energy companies have obligations to spend money to make UK homes more energy efficient, through ECO. If they miss their targets, they face large fines. This is why it is being offered free and why British Gas has changed its criteria for free insulation to include anyone with a suitable home. Homes that are not suitable are those built using timber or steel frame as they already have insulation in the frame. Most new homes built since 2000 will already have cavity wall insulation. 

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How to live more economically in your home

Live Greener and Save Money Doing It

Buying a house is one of the most exciting and expensive investments you could hope to achieve in your lifetime.  Exciting, because you have the freedom to put your own special brand of style and design on a fresh canvas; or the opportunity to fix up and improve on features that caught your eye.  Expensive, because the costs both known, unknown, hidden in paperwork and of course those to come, will take a sizeable chunk of your budget and salary.  One cost which many people tend to overlook is the lack of economic implementation.  “Going green” has been a tag line for many energy saving groups and the property market is no exception. As prices have risen over the last few years, energy consumption has been taken more seriously. 

Nowadays when browsing many leading property search websites you will see the Energy Performance Certificate (EPC) for each listing.  This is a good start to get you on the green awareness path but there are more ways to use less energy, which will save more money in future. The infographic below by Baines & Ernst entitled  “How to Live More Economically and Save the Planet” breaks down where households use [waste] the most energy, how to prevent this and how to cut costs by living a little greener. 

Ways to cut wastage in your home and save money

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Is the Consumer Code for Home Builders fit for purpose?

After close examination of the recent Adjudication Scheme case histories, we ask……..Is the Consumer Code for Home Builders worth the paper it is written on?    The clue is in the name “For Home Builders” not for homebuyers.  At best, house builders tend to view the Code as voluntary or optional despite many of the Code requirements actually being required by consumer legislation.   At worst, as is shown by the published case summaries, house builders knowingly continue to disregard the Code requirements in the full and certain knowledge that the worst that could happen would be slap on the wrists and a small award against them.  Now in it’s fifth year, the Code is frequently referred to by the industry being used as an opportunity to promote new homes.

Consumer Code coverThe Consumer Code for Home Builders was launched in April 2010 apparently as a response to the Barker Review in 2004 and Office of Fair Trading – Market Study of Home Building in the UK published in October 2008. The Consumer Code is allegedly the house building industry’s response to the issues raised in those reports relating to customer service and satisfaction. It was created by a “group of stakeholders within the industry” who “joined forces to consider the issues raised” to “produce a Code of Conduct for home builders.” It was first launched in April 2010 – over FIVE YEARS after the deadline in Barker’s report!

CodeThe Code claims to:  “provide protection and rights to purchasers of new homes, ensuring that all new home buyers are treated fairly and are fully informed.”  But the protection already exists with The Consumer Protection from Unfair Trading Regulations 2008, making it a legal requirement to treat consumers fairly and The Business Protection from Misleading Marketing Regulations 2008 reinforces the legal requirement not to make misleading or false statements. The Consumer Code for Home Builders if strictly followed, should result in compliance with the legislation, probably the main reason it was created by the house building industry.

The Code applies to all house builders registered with the new home warranty providers such as the NHBC, LABC Warranty and Premier Guarantee.  It consists of 19 requirements and principles that house builders must adhere to in marketing, selling homes and their after-sales customer service.  Failure by a house builder to adhere to the code requirements can result in exclusion from all registers run by the warranty bodies that participate in the scheme. Has this ever happened?  Very unlikely!

But is the Consumer Code effective?  –  Do house builders strictly follow it?  –  Are punitive penalties being imposed on builders who are found to have deliberately breached the Code?   Going by the latest published Adjudication Case Summaries for 2013 it would appear not.

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Ultra low interest rates a stealth tax on savers creating a house price bubble

The country is £1.2trillion in debt. The national debt has tripled in the last 10 years and the cost of interest to service this debt is the fourth largest cost to the country, behind education, welfare and health. The interest payments on the national debt cost each of the 30 million UK taxpayers more than £1,650 a year. Yet this Chancellor appears to have “spare money” to give to house builders? In a little under a year, according to figures from the Home Builders Federation (HBF), 55,000 reservations have been made using Help to Buy. Now the scheme has been extended to 2020, at the current rate around 385,000 new homes could be sold using the Help to Buy state-subsidy. 

MoneyThe Bank of England interest rate has been stuck at 0.5% for five years now – the lowest rate for 300 years. Who has this benefited? The winners are – anyone with a mortgage they shouldn’t really be able to afford, companies looking for cheap debt and the government, which has been able to add to the national debt aided by the very low rates. Oh and those that own shares, especially house builders shares. 

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Local Authorities approve building of new homes on flood plains

Against expert advice and clear objections from the Environment Agency, local authorities across the country are giving developers planning permission to build new homes on flood plains. In England alone, around 197 developments have been approved on flood plains since 2002 against the advice of the Environment Agency.  Around 200,000 homes built on flood plains in the UK, with 38,000 new homes having been built are in areas regarded as high-risk – in other words likely to be flooded.

Flood PlainsEven if new homes being built on flood plains are raised above anticipated flood levels, the floodwater will just be channelled elsewhere, perhaps to areas that would have otherwise escaped flooding.

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Environment Agency publish new flood risk maps

Flood 2New flood risk maps have been produced by the Environment Agency that, for the first time, also include areas at risk of flooding from surface water in addition to the risk from rivers and the sea. According to The Independent, new mapping techniques used by the EA have reduced the number of homes shown at risk of surface water flooding – when the drainage system cannot cope with extreme heavy rainfall – by 800,000 to 3 million with a further 2.4 million properties are at risk of flooding from rivers and/or the sea. 

The new EA flood risk maps will give insurance companies more information to set premiums and could alter the risk profile of homes now shown as at risk of flooding, with some homeowners seeing their premiums increase. 

For homeowners that search for the best deals using comparison websites, the average annual premium is £130 according to the AA.  However, those that live in areas deemed at risk of flooding pay huge premiums and have excesses that can be thousands of pounds, with insurance companies setting premiums to fully reflect the risk of flooding. 

Flood 1In the past, homeowners in high-risk areas have been subsidised to some extent by those living in regions with a low risk of flooding. However, this has now become unsustainable, with the increasing frequency, number and cost of claims arising from damage caused by flooding since 2007. Some policyholder’s premiums have risen substantially, by as much as 35%, after a revised flood risk assessment by their insurers. Many homes that had been flooded in the past have become virtually uninsurable. 

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