Flat leaseholders and small businesses face flood risk

The British Property Federation (BPF) has voiced concerns that leasehold properties in large blocks, homes for private rent, properties in council tax band H, and those built after 2009 will not be covered by Flood Re, the new affordable insurance facility for property in high flood risk areas.

Flood Re, which is the deal struck between the insurance industry and the government, has been billed as cover for all homeowners, but in fact has these key exclusions. The BPF has been campaigning to include leasehold properties within the scope of the scheme, pointing out that it is unfair to discriminate between those who live in a house and those who live in a flat.  There are nearly 5m leasehold properties in the UK and at least 800,000 of these are estimated to be in flood risk areas.

In an ongoing campaign, the BPF has repeatedly asked government for proof that leaseholders will not be adversely affected by the exclusion. It has therefore welcomed in its consultation response the government’s commitment to monitoring properties that have not been included in the scheme. However, as the regulations show no evidence of a mechanism that would allow Flood Re to be amended to include new categories of property at a later date, BPF remains anxious that this would not happen.

Other inconsistencies in the regulations have caused it further concern. Commonhold properties, whose insurance is held as a commercial policy, are included within the scope of the scheme which has created much confusion over who is in and who is out, with leasehold properties being excluded as their policy is classed as commercial. The BPF has urged clarity from government as to why some commercial policies are included in the scheme and others are not.

The regulations also fail to explain why the threshold for leasehold blocks included was set at blocks of three units or fewer, excluding two-up two-down conversions.

Ian Fletcher, director of policy, British Property Federation, said: “The government’s intention to monitor the impact on various excluded groups is welcome, but a suck-it-and-see attitude to affordable flood cover is not ideal for either householders, or people trying to run a small business.”

Michelle Banks, chief executive of the Association of Residential Managing Agents, said: “I am concerned that there appears to be no mechanism to amend the regulations to include new properties at a later date. Without this the government’s commitment to monitor the impact on leaseholder properties is an empty one, and the chances of leaseholders in high risk areas who are currently excluded from Flood Re being added to the scheme are low.”

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