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Claims arising under policies issued for leasehold properties can be triggered for any number of reasons.

They may be caused by a newly active landlord or management company, changing dynamics caused by new residents and neighbours within the building which can result in complaints to the landlord, or simply the conveyancing process bringing to light existing breaches of leasehold restrictive covenants. Whatever prompts the enforcement action, the resulting claim can be worrying for the insured property owner, time-consuming and potentially costly. As these two case studies show, no two situations are ever the same, and claims can arise many years after the policy has been issued.

Lofty ambitions

We were contacted in June 2015 by solicitors acting on behalf of a client buying a flat which they intended to rent out. The buyer had been made aware that some internal alterations had been made to the property several years previously. There was no evidence that the necessary consents had been obtained for the works, and the buyer’s solicitor had recommended they take out a policy to cover any breach of covenants in the lease, and for the lack of building regulations consent from the local authority (who also happened to be the landlord). As there had been no relevant communication with the local authority, we were happy to issue a Leasehold Restrictive Covenants and Lack of Building Regulations policy for £245, with a policy limit of £395,000.

In January 2024, almost nine years after we issued the policy, the policyholder contacted our claims team after receiving a letter concerning ‘unauthorised alterations’ from the housing arm of the local authority. They had become aware that internal alterations had previously been made to the property after our policyholder’s current tenant had contacted them with concerns about damp. During a subsequent visit by the Council to assess the extent of the damp in the flat, they noted that the loft had been converted into a living space, and that new stairs had been added to access the room. This raised two key issues. Firstly, the council had not been approached for consent at the time the works were carried out, either as the freeholder to request permission under the lease, or to grant building regulations approval. Secondly, it transpired that the loft space itself was not actually included in the lease of the property, and shouldn’t have been accessed or used at all.  

The local authority was determined to enforce the breach of covenant for the unauthorised works and resolve the dispute relating to use of the loft. They insisted that the stairs leading to the loft be removed and that the loft space itself be returned to its former state. At this point, our team got involved, and began investigating the details of the potential claim. From the evidence available, they were satisfied that the unauthorised stairs were the previous alteration works insured under the policy. Once they had reviewed the wording of the lease, it was also clear that consent would have been required for the stairs. 

As our policyholder was neither responsible for carrying out the works, or for alerting the local authority to their existence, we accepted the claim relating to the breach of covenants and lack of building regulations. However, we couldn’t cover any loss in value to the property arising from the loss of the loft space as a habitable room. This was actually a separate dispute relating to our insured’s unauthorised occupation of another part of the building, which was not included in the lease of the property and therefore not covered by the policy.

In light of the strength of the letter from the local authority and the position they were taking, we decided that the best course of action was to cover the cost of the work to put the property back to its original layout. The total cost of removing the staircase and replacing the ceiling, was just over £6,000, all of which was paid for by the policy. There were some additional works that still needed to take place to put the loft space back to its original use, such as removing all the electrical wiring and moving a boiler back down into the flat. The policyholder understood that this part of the building was not covered by our policy and was happy to cover the costs of this work, meaning that our team were able to close the claim.

Floor-ed thinking

In July 2014, we were asked to provide a quote for a third-floor flat in west London. The property had hardwood floors throughout, but there was a covenant in the lease requiring the floors to be carpeted. The seller had been able to provide proof that the herringbone flooring had been in place for 15 years, and confirmed that there had been no complaints in that time. As a result, we were happy to issue a Leasehold Restrictive Covenant policy covering any future enforcement action for the breach of covenant, for £459 with a policy limit of £1.2m.

In January 2024, almost ten years later, the policyholder contacted our claims team. They had received a letter from the agent acting for the freeholder. The letter stated that the “unauthorised hard flooring” was a breach of the lease, and demanded immediate steps be taken to either apply for retrospective consent, or to replace it with carpets and underlay. The policyholder hadn’t replied in the 10-day deadline set out in the letter, and the agents were now looking to begin legal action. 

Due to the time-critical nature of the correspondence, our claims team got to work immediately. They quickly established that the freeholder had been made aware of the flooring in 2023, after our policyholder had requested a lease extension, and the freeholder’s agents had visited the flat. Further investigation by our team revealed that the flooring had even been replaced in 2018 following a severe leak. At the time the policyholder’s home insurance company had insisted on a like-for-like replacement, which had been disclosed to the agents. Armed with this information, the team were confident that there was sufficient evidence to gain retrospective permission, and drafted a response for our policyholder to send, which fully outlined the details and dates of the floorings’ installation and replacement.  

We didn’t have to wait long for a response. Within a few weeks the agents replied with good news. They confirmed that the relevant consent had been granted for the hardwood flooring. This was excellent news for the team, as what had initially seemed like a very contentious and potentially expensive situation was very quickly resolved, with no upheaval or cost to our policyholder.

Expert support 

In both cases it took almost ten years from the policy being issued for action to be taken under the lease and for a claim to arise, demonstrating the long-term protection our cover provides, both for the initial buyer, but also subsequent owners of the property, and any lenders. Despite differing circumstances, our team were able to respond quickly, and provide expert advice and support, helping to ensure the claim issued against them were resolved as quickly as possible.