The City watchdog is clearing the way for millions of buy-to-let landlords and flat owners to claw back billions of pounds lost in secret building insurance commissions.
Leaseholders will be defined as customers of buildings insurance under new rules planned by the Financial Conduct Authority (FCA) that will give homeowners new grounds to claim for thousands in wrongly charged fees.
The proposals are designed to give leaseholders new ammunition to claim back past commission fees at tribunal. They will explicitly require insurance firms to act in leaseholders’ interests and will ban them from recommending policies based on commission fees.
Freeholders and managing agents have been charging commission fees of as much as 62pc on building insurance in an industry-wide scandal, highlighted after the cladding crisis inflated insurance bills. The average fee stands at nearly a third, according to the FCA.
The regulator’s investigation of 16 firms found that average broker commission charges on building insurance premiums surged by almost half between 2019 and 2022. This accounted for a fifth of the increase in insurance premiums leaseholders were forced to pay over the same period.
Neil Holloway, founder of M2 Recovery, an insurance specialist who works claiming back commission fees, said the rules will unlock an avalanche of claims from flat owners, many of whom are buy-to-let investors, for reimbursement.
Mr Holloway said: “We’re seeing a lot of claims management companies that are getting themselves organised and authorised specifically to attack this particular marketplace. They see this as the next big explosion.”
Previously, leaseholders only had a case to claim back commission charges over six years if they were listed as “co-insured” on their lease. The process to do so was also complex.
Under the FCA’s plans, however, all leaseholders should now have a right to get this money back, Mr Holloway said.
Harry Scoffin, co-founder of Commonhold Now, a campaign group, said: “This will open up the floodgates. We are going to see many, many lawyers saying they want to do these class actions because you can get every penny back.”
Martin Boyd, chair of the Leasehold Knowledge Partnership, a campaign group, said around 2.3 million leaseholders have been paying hundreds of millions a year in commission fees. “Over multiple years, that is billions,” he added.
A Department for Levelling Up, Housing and Communities spokesman said: “These findings are completely unacceptable and lay bare the shocking practice of brokers fleecing innocent leaseholders.
“Whilst the measures outlined by the FCA are a welcome first step, these don’t go far enough to protect leaseholders. We will be urging them to take immediate enforcement action.”
The FCA’s report comes as Michael Gove wrote to cladding manufacturers to warn that there will be “severe consequences” for firms that refuse to pay to fix unsafe buildings.
It marks the Housing Secretary's latest attempt to engage with cladding companies after the Grenfell Tower tragedy.
A letter from Mr Gove to the cladding firms Kingspan, Arconic, and Saint-Gobain said that the Government will “use all commercial and legal tools available to me to ensure you take responsibility”.
He added: “I have always been clear that those responsible for the building safety crisis must pay.
“But despite the fact that their products continue to put lives at risk, some cladding firms have no intention of doing what’s right and addressing their moral and financial obligations to innocent residents.”
https://news.google.com/rss/articles/CBMiZmh0dHBzOi8vd3d3LnRlbGVncmFwaC5jby51ay9idXNpbmVzcy8yMDIzLzA0LzIxL2xhbmRsb3Jkcy1oYW5kZWQtcmlnaHQtdG8tc3VlLW92ZXItaW5zdXJhbmNlLXBvbGljaWVzL9IBAA?oc=5
2023-04-21 05:00:00Z
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