Leaseholders in multi-occupancy buildings have unknowingly been victims of an unfair practice where landlords, in collaboration with insurance brokers, may be involved in undisclosed commission practices.
There is evidence that the practice has been going on since at least 1997.
Essentially, insurance brokers add commissions to the insurance policies they sell to landlords. Most of this commission is then paid to the landlord or property managing agents in return. The cost of this hidden commission is passed on to leaseholders in the form of higher insurance premiums. In turn, these premiums push up service charges.
Landlords and property managing agents manage your service charge money in trust. As a result, they owe specific legal duties not to make excessive or secret profits without disclosing the amounts to leaseholders.
Insurance brokers also owe legal duties not to assist landlords and property managing agents in breaching their duties to leaseholders.
The Financial Conduct Authority found in its sample that insurance brokers shared, on average, at least 50% of their commission with landlords and their property managing agents.
More than half of the insurance policies in the Financial Conduct Authority’s sample (58%) had a commission rate of 30% or more.
Some freeholders or property managing agents receive over 50% of insurance premiums as commission.
The average broker commission per policy in 2022 was over £2,500.
This practice also creates a potential conflict of interest, as the property managers and freeholders may not be acting in the best interests of the leaseholders when choosing the policies. They are incentivised to arrange policies that pay the highest commission rather than providing value for money for leaseholders.
Leaseholder Action has been formed at a turning point in leaseholder rights in the UK. With new reforms introduced by the Financial Conduct Authority, leaseholders now have the right to challenge hidden costs and unfair practices in the sale of buildings insurance.
Unfortunately, the Financial Conduct Authority has not provided any remedy for inflated insurance costs for policies arranged before 1 January 2024. Leaseholders cannot complain to the Financial Ombudsman because they are not regarded as the policyholder. The only way to obtain redress is by bringing legal action through the courts against the relevant landlords and their brokers.
If you're frustrated by unfair businesses practices, you're not alone. Our initiative, backed by legal experts at Velitor Law and funders Balance Legal Capital, is at the forefront of this battle for justice.
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The time for change is now. Embrace this opportunity to claim your rights, challenge hidden commissions, and join a claim dedicated to ensuring fairness and transparency in leasehold insurance.
Velitor Law and Balance Legal Capital have been enlisted to initiate a group action on behalf of leaseholders who have been overcharged by landlords and insurance brokers.
Velitor Law is a leading litigation practice based in London, specialising in representing claimants and pursuing justice against formidable institutions. With expertise in handling high-profile cases, Velitor Law offers comprehensive representation in a variety of disputes.
For more information about Velitor Law, visit their website here.
Balance Legal Capital is a leading litigation investment fund manager based in London, with expertise in providing finance for commercial disputes and class actions. Balance is proud to provide the financial support to enable consumers to obtain redress from corporate wrong-doing.
Balance Legal Capital is a funder member of the Association of Litigation Funders (ALF), the body responsible for the self-regulation of litigation funding in England and Wales.
For more information about Balance Legal Capital, visit their website here.