Soaring insurance sends cladding victim’s service charge rocketing

A landlord faces financial ruin due to having to pay her share of building insurance costs that have soared from £34,000 to more than £500,000 a year amid the cladding scandal.

Grandmother Julie Fraser, 59, bought the investment property – a two-bedroom flat in Cheshire – in 2016 with her life savings for £76,000 as part of her pension plans.

Five years on she faces a cladding repair bill that almost matches the price of the flat at £73,000.

But it is not the eye-watering repair bill that is causing the most immediate financial concern for Mrs Fraser.

Instead, it is the soaring quarterly service charge on the property – which includes the cost of her site’s building insurance – that has become unaffordable and is the most pressing financial issue. 

The soaring quarterly service charge on the property – which includes the cost of her site’s building insurance – has become unaffordable.

The buildings insurance has soared due to the property’s cladding issues, up from £33,892 in 2019 to £514,000 in 2022. 

This is despite new fire alarms being installed at the site.

It has led to the service charges that she pays rising from £254 a quarter in 2019 to £719 a quarter in 2022.

Mrs Fraser lives five minutes from her investment flat, which is part of a development that has 288 homes on it.

Mrs Fraser bought her two-bed flat in 2016

Even though she rents out the property, she is responsible for paying the service charge. But she can no longer afford to pay.

She said: ‘I can’t afford to pay the £719 and face being in breach of the lease if I am unable to pay it.

‘I thought I was doing the right thing by investing in the flat. I’m now unable to work due to health issues and have been living off savings for the past two years. Those have now dried up.

‘The flat has no mortgage on it as I bought it with my life savings to help provide my pension. There are so many people in the same situation who are worried sick about these costs.’

Her comments come after Michael Gove, the Secretary of State for Levelling Up, Housing and Communities, wrote to the Financial Conduct Authority asking it to review the buildings insurance market for multiple-occupancy residential buildings.

In the letter, Mr Gove wrote that ‘building insurance premiums have increased dramatically for almost all leaseholders in blocks of flats’.

It has responded, saying: ‘Although insurance premiums are just one aspect of the rising costs faced by residential leaseholders in the wake of the Grenfell tragedy, we want to ensure products provide fair value and premiums fairly and accurately reflect risk.

‘We are asking firms to consider what actions they can take to help leaseholders, whether individually or by identifying collective solutions as an industry.’

Since the Grenfell Tower fire in 2017, concerns about cladding have become a national issue

Mrs Fraser welcomed Gove’s recent intervention on cladding repair bills, in which he announced that leaseholders living in blocks under 18m would not have to pay their cladding repair bills. 

She said: ‘I believe Michael Gove wants to make difference. He is listening and so far, he is doing what he said he would do.

‘I would like to think that next year will be more positive, and that our insurance premiums go down closer to where they were. Realistically, it would be good to get them down to £50,000.’