Leaseholders’ Rights (Insurance)

Jim Fitzpatrick Excerpts

Wednesday 22nd October 2014 Westminster Hall

[Stella Creasy (Walthamstow) (Lab/Co-op)]

I want to start by thanking the Minister for coming here at short notice. This issue might seem like a curate’s egg. I do not know whether he saw the article I wrote outlining the issues in PoliticsHome.

We might think that the right of a person to know what they are paying for is a consumer issue, or it might seem like an insurance concern about whether it is fair to make residents pay for terrorism insurance if they live in my part of town. Indeed, the matter could be seen as a constituency concern—the besmirching of Walthamstow as a site of potential terrorism—or it could be seen as a leasehold issue about how leaseholders and freeholders can resolve disputes. I know that other Members here have an interest in that issue.

I shall outline the concern and then ask the Minister questions. I hope we can make progress on the issue, because it has been a long-running vexatious issue for nearly 4,500 of my constituents in Walthamstow, some of whom are here today because they are so frustrated by it. I should declare that I am a previous leaseholder of the Freehold Managers company in question, so I have known for a long time about the nature of the leases and the exorbitant insurance that the company required of those of us who had flats with it.

The application of a terrorism insurance surcharge is a relatively new experience for people in Walthamstow. As a diligent MP, I queried it with the company. Why did it feel the need to add such a surcharge to already expensive insurance? In response, it sent me a copy of a press cutting about how one of those involved in the plane bombing threat had lived in Walthamstow at one time. I was mortified by the suggestion that that therefore required people in Walthamstow to be insured against terrorism ad infinitum, so we started to look into the situation.

I will set out the concerns. Residents are paying on average £204 for their buildings insurance. On any reputable price comparison site for Walthamstow, we could find considerably lower premiums. On top of that, we are adding in another £70 for people who live in the E17 postcode in my part of town. I also have the E10 postcode, where there are flats whose residents are being charged a mere £37. Perhaps the company feels that terrorists will be more likely to want to live and bring about destruction near Walthamstow Central station rather than in Walthamstow as a whole, but I digress. That is a 40% increase on the cost of an insurance that is already not competitive, and the leaseholders who have managed to buy their freehold tell me that their premiums are on average £120 lower.

I am sure the Minister will say it is for the leasehold valuation tribunal to resolve issues about whether charges are fair. Indeed, I am extremely conscious that the leasehold valuation tribunal has recently issued a ruling that it is right for Freehold Managers to apply terrorism charges. After all, this is not part of the original lease. There has been confusion and discussion about whether it could be argued that insuring properties against explosions included terrorism. There has been concern that what was originally intended to apply to commercial property has been applied by Freehold Managers to residential properties. I am acutely conscious that the judgment held that although it was not explicit, it was good practice to insure against any sort of damage or destruction, which could arguably include terrorism.

Having researched terrorist examples in residential areas —the 4,500 flats are in residential areas in Walthamstow—I am surprised that there is a determination that terrorism is such a threat in Walthamstow that insurance should be increased by 40%. Let us consider some attacks: the sarin gas attack in Matsumoto in Japan, the Rajneeshee bioterror attacks on salad bars in the United States and the tragic murder of Lee Rigby. We have had IRA bombings in London, and the Litvinenko incident caused several million pounds worth of damage to properties because of contamination. So there might be a case that terrorism is something that people have to consider in a residential area.

However, even if one accepts that it is fair to ask people to pay for such damage, the concern for my residents is that they are simply not able to scrutinise the policy. Freehold Managers has steadfastly refused to reveal the details. When one looks at the IRA bombing or the Litvinenko attack, one must take into account the location. Location matters in insurance, so we want to know whether Walthamstow has been assessed as a high or a low-risk residential area for terrorism and what that means for the charge. In essence, why is there a 40% increase?

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

My hon. Friend is making a powerful case for her constituents. Is what she describes just another example of property management companies taking advantage of people who have signed into a contract?

[Stella Creasy]

I agree with my hon. Friend, whose constituency is to the south-east of mine. I am sure he knows Walthamstow and will be concerned that it is considered such a risk by Freehold Managers. We simply do not know how the company reached this figure of a 40% increase in insurance because Walthamstow might be a place of terrorism. We do not know, for example, whether a gas attack in which people needed to be decontaminated, as opposed to an explosion, would be covered by the policy. We simply have no details.