New rules from the Financial Conduct Authority (FCA) are set to pave the way for buy-to-let landlords and flat owners to be able to claim for thousands in wrongly charged fees added to buildings insurance policies.
The proposed rules will make it much easier for leaseholders to claim back so-called secret commission fees that insurance companies have unfairly and illegally added to buildings insurance policies for managed blocks of flats.
Previously, leaseholders needed to be named as a co-insured on their lease, making the process much more complex than the proposed new tribunal process from the FCA, and the cost of buildings insurance policies is expected to fall as a result.
M2 Recovery Founder Neil Holloway said the new rules could lead to an avalanche of claims from flat owners.
“We’re seeing a lot of claims management companies that are getting themselves organized and authorized specifically to attack this particular marketplace,” he said. “They see this as the next big explosion.”
The new rules will also allow leaseholders to claim back any secret commissions that may have been paid over the last six years, meaning that there is nowhere to hide for any wrongdoers in the market.
And the sums involved could be huge, with the FCA saying that the average commission currently stands at one third of the price of an insurance policy – some freeholders and managing agents have been charging commission fees as high as 62%.
Martin Boyd, chair of campaign group the Leasehold Knowledge Partnership, told The Telegraph 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 Leveling Up, Housing and Communities spokesman told the paper: “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.”