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Propertymark responds to Flood Insurance Review 2020

Thursday 13 August 2020

An estimated seven million homes remain excluded from the Flood Re insurance obligation, including 1.1 million leasehold homes, and three million homes in urban areas. Propertymark has long held the view that the scheme should be extended to cover the leasehold and private rented sector.

The independent review was set up by the UK Government following reports that many of those affected by the flooding last year in November 2019 did not have insurance cover.

Flat owners, private rented sector landlords, and renters are recognised as householders, and as such should get the same guarantee as those who own their properties. Propertymark’s response to the Flood Insurance Review, in July 2020, explored the issues which arise when floods affect properties and their residents.

Issues studied

The review looked for views on how to ensure housing and other property developments can become more resilient to flooding, three main concerns are prevalent about the re-insurance scheme Flood Re. Firstly, it is not managing to cover all the properties the scheme was designed to include. Secondly, some high street businesses are unable to get cover. Thirdly, some landlords are unable to get a mortgage without the likelihood of cover.

Propertymark’s questioned whether leaseholders’ access to cover where private residents in flats are treated differently to commonholders and freeholders because of their tenure. Building cover on leasehold flats must be arranged on a block basis to ensure that the whole building is covered. However, the insurance industry views such cover as ‘commercial’, even though the premiums are entirely paid for leaseholders via their service charge.

Buy-to-Lets are not covered and, therefore, insurance is expensive for thousands of landlords. If the property is in a high flood risk area and they can’t afford the premiums, this could lead to abandonment, a reduction of housing stock, and added pressure on local housing markets.

If the issues explored, faced by those which the scheme, unfortunately, does not cover, the critical issues and vulnerabilities of the gaps in the scheme will exacerbate. The scheme needs to address the key developments that need adopting, to provide affordable cover for all and protect the housing market.

The review is expected to be complete by the end of September 2020 and report shortly after.

Propertymark's response