Block buildings insurance voided by insurer?

While the insurer is technically correct in terms of the policy wording, I believe it is wrong as it has not made the decision in utmost good faith (uberrima fides). The actual cause (proxima causa) of the damage is the water escape from the flat above the sub-let unit.
If it were me, I'd appeal the claim denial.

I think this situation may be more common than anyone cares to know about.
Insurer advised me that if the insurance doesn’t exactly match the terms in the lease agreement then it is void.
It is an offence for a block of flats not to be insured.
It is an area which falls under due diligence by conveyancers in the purchase of a lease.
Leaseholders are entitled to see the block insurance policy under LTA s. 21(1) and to check the premium paid is reasonable (s.19) and check against lease terms and contact the Insurers particularly if the leaseholder also holds a share of the freehold in an RMC.

You may have a negligence case against the freeholder for purchasing a policy with a restriction over which an individual leaseholder has no control, especially if the lease doesnt require freeholder consent to sublet or if such consent was granted. I would speak to a solicitor to check.

Reply to the comment left by DPT at 10/01/2025 - 10:30
My thoughts:
1. Did the freeholder ask the leaseholders about their tenants?
2. Did the lease allow letting to a LA?
3. Did the leaseholder who let to a LA reply honestly?
4. All the other leaseholders are being penalised for something they themselves had no part in

Insurance has become a nightmare and very costly

I'd let 2 leasehold flats for the past 16 years and never considered this as an issue. My remaining flat is in a block of 137 and includes some housing association flats. Also, local councils are constantly sending requests for accommodation for asylum seekers and refugees [no thanks!].

This is a massive concern because leaseholders have no control over the Buildings Insurance, and we know Freeholders and their managing agents will often source the most expensive insurance, with the highest commission, and most restrictive policy terms and conditions. They are also reticent about disclosing the policy terms to leaseholders when requested, despite being required to do so by law.

I'm an RTM director, and while our insurance is suitable for sub-letting, I can't be certain none of the [mostly absentee] leaseholders haven't let to the council. I've just raised this as an issue with our RTM Co Ltd.

I feel the Freeholder should be held responsible in this situation for not ensuring the tenancy meets the insurance terms if the leaseholder has sought permission to sublet to the council. But if the leaseholder has sublet to the council without informing the Freeholder, that leaseholder should be held accountable for a major breach of the terms of their lease with extremely serious ramifications.

Well er if it’s an RTM or RMC then the qualifying leaseholder's are the joint freeholders as shareholders /member under CoAct 2006 and bear liability for non compliance under Co. Articles of Association

Some questions
Who arranges the insurance?
Was it the flat with the council let that caused the damage?
Does the policy contain a non invalidation clause?
What has your broker advised?

Hopefully all joint Freeholders would have read the Ts&Cs of the policy before paying for it!

The Leaseholder who has rented out their property who in turn sub-let, contrary to the Ts&Cs of the policy will be liable for the damage to your flat - might have to go to court though to see any money.

Interestingly, should anyone rent to someone on benefits, tenants aren’t obliged to inform landlords of their employment status, or whether they are in receipt of benefit. There’s no obligation to disclose - and it’s unlawful to refuse to rent to those on benefit. At any stage during the year, benefit status might change. Insurance policies with terms preventing landlords renting to those on benefit are not likely to be enforceable as those terms are discriminatory. Most reputable insurance companies are removing these discriminatory clauses. 

Reply to the comment left by Kizzie at 10/01/2025 - 12:18
Unless you know different, I don't believe RTM is the same as share of freehold, where leaseholders are also freeholders. Under RTM, leaseholders remain leaseholders, and are liable for paying service charges, but are not liable for the obligations of the freeholder. Outside RTM, the managing agent is responsible for ensuring the obligations of the freeholder are met, including in the building insurance. Likewise, inside RTM, the managing agent is responsible for ensuring the obligations of the freeholder are met.

If I'm wrong, then us RTM Co directors need to reconsider the situation.

I stand corrected if you’re right about RTMs but RMCs are limited liability registered at Companies House in order to protect property assets and either limited by shares or limited by guarantee.
Ltd by shares each leaseholder has £1 paid up share in the company as the beneficial ownership of the company and obligations under company memorandum & articles AND separately obligations under leaseholders’ leases.two hats.
Companies house website sets out duties of the directors of RMCs who must be leaseholders.
There is no external freeholder. The RMC and perhaps RTM holds the freehold interest and leaseholders as shareholders/guarantee members own a share in the freehold ie joint freeholders