Flood Re Insurance Scheme

Craig Whittaker Excerpts

Tuesday 6th December 2016 Westminster Hall

[John Stevenson]

I have some sympathy with what my hon. Friend says. In Carlisle, the sporting facilities were badly affected and they have ongoing issues with their insurance. She has raised a similar issue, which the Minister might wish to address when she sums up.

[Craig Whittaker (Calder Valley) (Con)]

My constituency, including several thousand homes and several thousand businesses, was also badly hit. Last weekend I met some residents of a block of 10 leasehold flats, next door to seven bungalows. The bungalows are eligible for Flood Re, but the 10 leasehold flats are not—one resident had bought a flat because they could not afford a bungalow. Does my hon. Friend agree that the £50,000 excess that each flat individually is being charged for flood insurance is excessive? Does he agree that Flood Re should be relooked at for that area of private residents?

[John Stevenson]

My hon. Friend is in many respects raising the very issue that I am about to deal with, so I obviously have a great deal of sympathy. Again, it will be interesting to hear what the Minister says about that point.

The real issue concerns long leaseholders who live in a property that is in effect their principal private residence—it is where they live, have their family and community, and so on. To all intents and purposes they are homeowners, but for a variety of legal and technical reasons they do not own the freehold—they are long leaseholders, but they do not own the freehold.

A group of long leaseholders will have a lessor, which is usually a management company. The management company owns the freehold and individuals take a lease on the property. Often the management company is in fact owned by the leaseholders. Leases may be for 999 years, and the freeholder is the management company, which would control it from there. They would be responsible for the communal areas, which could include grass cutting and roads, and may be responsible for parts of the fabric of the property, depending on the nature of the leasehold interests—whether it is a tenement flat going upwards or a group of properties next to each other. There will be variations, depending on the structure of the agreement at the outset. Interestingly enough, the landlord will be invariably responsible for ensuring that covenants between leaseholders are enforced to ensure that they comply with certain requirements under the terms of the leases.

It is interesting that the Flood Re legislation already allows for that set-up to a certain extent. It is allowed for properties of three flats, and three only. We could therefore have a situation where a landlord occupied one of the three properties—admittedly, they would have to live in one of them—and had another two on leasehold that are covered by Flood Re.

I will read from a letter from someone in the circumstances that I have raised. The freehold area is known as Willowbank, and he says:

“Willowbank is owned by a company, but that company is owned by the 29 leaseholders. The company has no income and no reserves. It makes no profit and pays no dividend. The two directors are paid neither a salary nor expenses.”

In many respects, Flood Re was there to help people like that. They are principal private occupiers who own their properties that are effectively freehold, but for whatever technical reason they are called leasehold and not covered by the legislation.

The legislation is meant to cover the whole of the United Kingdom, which includes Scotland, and in Scotland they have tenement blocks. As I understand it, the set-up under Scottish legislation is similar, but the tenement blocks, which are similar to the scenario I have set out, are covered by Flood Re legislation. I genuinely believe that it was not the intention of the legislation or of Parliament to exclude those I have described from Flood Re. I think the goal was to help secure the insurance requirements for people in those circumstances.