Who Is Responsible for Arranging Buildings Insurance?

For most managed properties — blocks of flats, purpose-built residential schemes, and mixed-use buildings — the legal responsibility for arranging buildings insurance rests with the freeholder, not individual leaseholders. In practice, however, freeholders routinely delegate this function to their appointed managing agent. That delegation carries real weight: if the wrong cover is placed, if a policy lapses, or if a claim is declined due to an error in the risk presentation, the managing agent will find itself in an uncomfortable position.

The lease is the starting point. Most residential leases include an obligation on the landlord or their agent to maintain buildings insurance in the joint names of the freeholder and leaseholders, covering the full reinstatement value of the building. When you act as managing agent, you are typically exercising this obligation on the freeholder's behalf — which means errors of omission, such as failing to notify the insurer of material changes to the building, fall squarely in your direction.

What a Compliant Buildings Policy Must Cover

A buildings policy for a managed block must cover the full reinstatement cost of the structure — from the foundations to the roof — including all communal parts: lifts, hallways, stairwells, plant rooms, car parks, and any outbuildings. The sum insured is not the market value of the building and it is not the purchase price. It is the amount it would cost to demolish what remains after a total loss, clear the site, and rebuild the property to its current specification from the ground up.

Standard perils covered under a well-structured block policy include fire, flood, storm, subsidence, escape of water, malicious damage, and impact. For managed blocks with communal areas, property owners' liability cover should also be embedded, protecting the freeholder and managing agent against third-party claims arising from injury or damage in those shared spaces.

It is worth checking explicitly whether the policy includes cover for trace and access — the cost of finding the source of a leak, which can be substantial in a multi-storey block — and loss of rent or alternative accommodation if a flat becomes uninhabitable following an insured event. These extensions are often assumed to be present but are not always included as standard.

The Sum Insured Problem: Why Underinsurance Is So Dangerous

Underinsurance is the single most consequential error in commercial property insurance, and it is remarkably common. Research consistently finds that around three-quarters of UK buildings are not insured for their true reinstatement cost. For a managing agent overseeing a portfolio of blocks, the probability that at least one property is materially underinsured is high.

The mechanism is the average clause — a standard condition in virtually all buildings policies. If a property is insured for less than its true reinstatement value, the insurer reduces any claim payout proportionately. Critically, this applies to every claim, however modest — not just total losses. A burst pipe, a storm-damaged roof, a fire in a single flat: all reduced in the same ratio if the building is underinsured.

Rebuild costs have risen significantly in recent years. The Building Cost Information Service reported a 3.8% increase in reinstatement costs in the year to January 2025 alone — meaning a building revalued in 2020 could be 15–20% underinsured from inflation alone, before any physical changes to the building are taken into account.

Four Underinsurance Errors That Catch Property Managers Out

Where Liability Sits When a Claim Is Disputed

When a claim is declined, reduced, or disputed, the question of who bears responsibility depends on the specific reason for the insurer's position. Managing agents need to understand the most common fault lines — because in many dispute scenarios, the agent is in the firing line.

If a claim is declined because the property was materially underinsured and the managing agent was responsible for maintaining the sum insured, the freeholder or RMC may have a claim against the managing agent for professional negligence. Managing agents should hold adequate professional indemnity (PI) insurance of their own — separate from the buildings policy — for precisely this reason.

If a claim is reduced because of a material non-disclosure — the insurer was not told about a change in occupancy, a significant refurbishment, or a prior claims history — liability falls on whoever was responsible for providing accurate information at inception or renewal. The Insurance Act 2015 places a duty of fair presentation on the insured, requiring active disclosure of all facts that a prudent insurer would consider material.

The Leasehold and Freehold Reform Act 2024: What Changes for You

The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024 and contains specific provisions that directly affect how managing agents handle buildings insurance for residential leasehold blocks.

The Act requires freeholders and managing agents to provide leaseholders with detailed insurance information as a matter of routine — including the policy details, the sum insured, and full transparency about any fees received for placing the insurance. Commissions received by freeholders or managing agents from insurers or brokers, where those commissions do not demonstrably benefit leaseholders, are now banned. This follows the FCA's multi-occupancy building insurance (MOBI) reforms introduced in 2023.

Agents who have historically relied on insurer-paid commissions to supplement their management fees need to review those arrangements and, in many cases, restructure them entirely. Insurance must be placed transparently, with full documentation of any remuneration received.

Property Manager's Buildings Insurance Checklist

• Confirm the legal entity — check the lease to establish whether the obligation sits with the freeholder, an RMC, or an RTM company before placing cover.
• Base the sum insured on an RCA — not market value, purchase price, or a desktop estimate. Commission a site-attended assessment by a RICS-registered surveyor.
• Index annually — use the BCIS House Rebuilding Cost Index to uplift the sum insured between formal assessments, at least every three years.
• Notify material changes — inform the insurer of any significant refurbishments, changes in occupancy, or extended vacancies during the policy period.
• Check policy extensions — confirm that trace and access, alternative accommodation, and property owners' liability are included, not just assumed.
• Document insurance transparency — provide leaseholders with policy details and a full breakdown of costs and any fees, in line with the Leasehold and Freehold Reform Act 2024.
• Review your own PI cover — ensure your professional indemnity insurance is adequate to cover errors or omissions in the placement or management of buildings cover.
• Work with a specialist broker — block insurance is a specialist class. A broker with specific leasehold block experience will identify gaps a generalist might miss.

Sources: RebuildCostASSESSMENT.com (2024 underinsurance data); Building Cost Information Service, BCIS Residential Rebuild Cost Index (January 2025); RICS Professional Standard — Reinstatement Cost Assessments for Insurance Purposes (3rd edition, reissued June 2024); Leasehold and Freehold Reform Act 2024; Insurance Act 2015; FCA Multi-Occupancy Building Insurance (MOBI) regulations 2023. This guide is for information purposes only and does not constitute insurance or legal advice. Always consult a qualified adviser for your specific circumstances.