It is all too easy for a busy or pragmatic landlord to assume that if a tenant is covered by a buildings insurance policy, they should be expected to pay their share of the service charge or insurance rent towards the cost of the premium.
That was not the view taken by the Upper Tribunal Lands Chamber in the case of Green v 180 Archway Road Management Co Limited  UKUT 245, on appeal from the Leasehold Valuation Tribunal.
Ms. Green owned a 99 year lease of Flat 180, which was part of a premises let to four tenants. Under the lease, she was responsible for paying a quarter share of the annual cost of insuring the building. This was subject to an express covenant by the Landlord to insure the building in the joint names of the lessor and lessee.
Over a period of 4 years, the Landlord’s insurers issued the landlord with an annual insurance certificate. In one policy year, the certificate expressly referred to Mrs Green’s interest in Flat 180. In the other 3 years, the insurer’s certificate merely stated, somewhat enigmatically, that the policy contained a general interest clause in relation to the tenants.
A dispute arose between Ms. Green and her landlord as to whether, in the circumstances, the landlord had complied with the covenant, and whether she was liable to pay a share of the annual insurance.
Evidence was provided to the Court that the “general interest” wording was understood and accepted by the insurance market as conferring a benefit on the tenants as if their interest had been noted, and that insurance policies rarely in practice stated the tenant’s individual names, because in many instances the tenants would be too numerous and changing too often for this to be feasible.
Despite this, the Upper Tribunal found against the landlord, and released Ms. Green from the obligation to pay her share of insurance rent to the Landlord for the 3 years were her personal interest was not specifically referred to in the insurance cover, holding that:
“To place insurance in the name of the lessor, with no mention of the name of the lessee and with the lessee’s interest being dealt with merely by the general interest clause, is not the same thing as placing insurance in the joint names of the lessor and lessee.”
The Tribunal also concluded that tenants could be disadvantaged by not having their interest set out in the policy cover, because if the freeholder ceased to be reputable, the proceeds of indemnity might be diverted.
The outcome of the case depended upon the fact that the lease imposed a specific obligation on the Landlord to insure in joint names. This of course is not always the case, and where the landlord does not enter into such an obligation, the result may be different.
However, the obligations about insuring are strictly construed. If the insuring clause operates on this basis, the landlord needs to be diligent in his own interests about informing his insurer or his brokers that a tenant needs to be specifically named in the policy, and not just swept up in a general interest provision. Otherwise, the landlord is at risk of ending up unable to recover the insurance premium from the tenant at all, even if a loss sustained by the tenant would be honoured by the insurers, if the landlord made a claim for it on the tenant’s behalf. On a large estate, this could leave the landlord with a significant hole in its accounts.
The moral for the landlord is: (i) check the lease; (ii) check the policy; and (iii) speak to your insurers if you need to.