Is apartment insured after winding-up?
PROPERTY CLINIC: Q I am looking for some advice about a purchase of a property I made two years ago. It is an apartment in a block of three apartments; the other two are unoccupied at the moment and are only partly finished. This is in a mixed estate of apartments and houses where some are occupied and others are unfinished.
A recent event has left me with some concerns regarding the contracts that I signed.
The management company, X Ltd, which holds the block insurance for the apartment building in which I purchased, has wound up. At present there is no management company, and after speaking to the developer (also X Ltd) it looks as though he is not going to put a new one in place.
He has informed me that my block insurance is not affected by this as he has renewed the insurance through Y Insurance for the whole complex, and my bank is named on that insurance.
My worry here is that he is named on this insurance and not me – therefore, if a fire, for example, were to destroy my building, I would be relying on him and his insurance company to restore the building.
Could you clarify what the insurance status is for my apartment, in light of all this, and, what legal standing I have if I have no insurance in place?
AProperty title to apartments usually takes the form of a lease granted by the property developer to the apartment owner for a long period (often 999 years).
Traditionally, the property developer commits to transferring his interest (the landlord’s interest) to an owners’ management company specifically created to hold the freehold title of the estate once completed.
The lease contains many obligations on the part of the apartment owner and the lessor (either the developer or owners’ management company) which will include the owners’ obligation to pay service charges and the lessors’ obligation to insure the structure against certain risks.
The insurance policy for the structure and the common areas will be taken in the name of the developer or owners’ management company, whoever owns the building at the time.
In your situation, as the developer has not transferred ownership of the estate to the owners’ management company, the insurance is in the developer’s name.
As a minimum, you should ensure that the insurer confirms the interest of you and your bank in respect of your specific apartment. In addition, you should request confirmation that the premium has been paid in full.
In the event that the premium is being financed you could request that the insurer informs you of any cancellation of the policy during its term.
Since September 30th, 2011, the freehold interest of the common areas of all multi-unit developments (MUDs) should be transferred to the owners’ management company.
There is some concern over your management company having been wound up, as normally this company would have already contracted to receive the freehold of the common areas and is named as the perpetual lessor in each of the title documents of the properties sold in your estate.