RTM buildings insurance: what do you arrange, and what stays with the freeholder?

Insurance is one of the biggest lines in most service charges, and one of the least questioned. It is also the first thing your Right to Manage company has to get right, because the building needs cover from the day you take over.

The short version. Arranging buildings insurance passes to your RTM company along with the rest of the landlord's management duties. Cover must be in place at handover, and the timing takes planning. A single building will not have the bulk buying power a large freeholder has, so be ready for that, though there are practical ways to keep the premium sensible. And while the day-to-day management is now yours, a handful of powers stay with the freeholder, so it pays to know exactly where the line falls.

In this guide:

• Who insures the building after Right to Manage
• What you need to insure
• Getting cover, and keeping the premium down
• Water leaks, the claim that costs most
• Planning for emergencies
• What still sits with the freeholder
• Approvals: where you and the freeholder meet
• What is changing

Who insures the building after Right to Manage?

Arranging buildings insurance is one of the landlord's management duties that transfers to the RTM company, so from the acquisition date it is your company's job to make sure the building is covered.

The tricky part is timing. At handover there may be no service charge money in the pot to pay a premium, and leaseholders may already have paid for insurance that year under the old regime, so they will not be keen to pay twice. Plan the handover date around this where you can, because everything is simpler if you take over at the start of a new service charge or insurance year. If you are not taking on the existing policy mid-term, the freeholder is free to cancel it. They may be entitled to a partial refund, which should go back into the service charge fund, but check the policy terms first: an insurer may refuse if there have been claims, or where it is specialist cover such as terrorism.

What you need to insure

Depending on the building, you may need:

• a buildings insurance policy, covering the building and grounds against risks such as fire, escape of water, storm and subsidence, and likely also occupiers' liability, plus employers' liability if the company employs anyone
• a terrorism policy, a specialist policy covering explosion or terrorist activity that could damage the building
• an engineering policy, sometimes called plant protection, if you have lifts, boilers or plant rooms
• directors' and officers' insurance, which protects the directors themselves

What you do not insure is the inside of people's flats. Contents are down to each occupier, and any leaseholder renting their flat out will want their own landlord policy. Worth saying plainly to residents early, because it is a common misunderstanding and it surfaces at the worst possible moment, usually mid-claim.

Getting cover, and keeping the premium down

Here is the honest part. A large freeholder normally insures a whole portfolio under a single block policy, which brings bargaining power and spreads risk. One building cannot match that, so an RTM company may be quoted a noticeably higher premium than the building was paying before. This is one of the few areas where taking over can cost more rather than less, and it is far better to know that going in than to meet it at renewal.

There are practical ways to bring it down:

• take over the freeholder's existing policy if the insurer agrees, which is especially useful mid-year because it avoids paying a second premium in the same year
• agree a higher excess, particularly on escape of water, the most common claim
• use a broker who places cover for blocks of flats and can put your building into a wider scheme
• use your rights to get information from the landlord, so you know the sum insured and the claims history before you go to market

Remember too that the premium is a service charge cost like any other, so it has to be reasonable and leaseholders can challenge it, as covered in our guide to RTM service charges. Going to market and comparing quotes is the simplest way to show that it is.

Water leaks, the claim that costs most

Water leaks are by far the most common insurance claim in blocks of flats. Showers, baths, pipework, radiators and washing machines are the usual culprits, and most comprehensive policies cover leaks between or within flats. If you have a flat roof, rainwater leaks may come into it as well, which is one more reason to keep the roof maintained.

Two things follow. The building's claims history drives the premium, so reducing leaks is worth real money, and something as simple as reminding residents to check appliance hoses and report drips early makes a difference. And know your excess before you need it. It can run from £500 to £2,500 or more, claims often take months to settle, and you need to work out whether the excess falls on the leaseholder responsible or on the general service charge fund. The lease decides that, so read it before the first claim rather than during it.

Planning for emergencies

Things break at inconvenient times. Decide in advance who residents call at 11pm on a bank holiday, and make sure everyone knows. For a small block, having a 24 hour plumber, locksmith and glazier already on the books is often enough. For a larger building you may want a standing arrangement with a supplier for out of hours cover. And in a genuine emergency, for example a serious leak that could reach electrics or a gas installation, the fire brigade can attend.

What still sits with the freeholder

Right to Manage transfers management, not ownership. The freeholder still owns the building, the leases are unchanged, and ground rent remains theirs to collect. A few specific powers stay with them too.

The most significant is forfeiture, the process of ending a lease because of a breach. Your RTM company cannot start forfeiture proceedings; that power stays with the landlord. In practice the company is responsible for making sure leaseholders keep to their covenants and for putting breaches right, and you must report any breach that has not been remedied to the landlord, unless they have told you otherwise. If the lease gives the landlord a right of access to a flat for compliance or enforcement, that right is available to your company.

The same line shows up with service charge arrears. The company can chase the debt and take legal action to recover it, but it cannot end a lease, so if arrears cannot be recovered any other way you would have to ask the freeholder to use their powers. In practice, firm and fair credit control from the outset means you rarely get near this. The freeholder is also entitled to become a member of your RTM company, which is by design, since they still own the building, though the articles limit how much voting influence that carries.

Approvals: where you and the freeholder meet

Most leases require a leaseholder to get consent for certain things: assigning the lease when they sell, subletting, making structural alterations. The power to grant those approvals passes to your RTM company, but you must notify the freeholder before granting anything. The notice periods are 30 days for assignment, subletting, placing a charge on the property, parting with possession, structural alterations or improvements, and changing the use of the property, and 14 days for everything else.

You do not need the freeholder's actual consent. If they do not object within the notice period, you can grant the approval. If they do object, they must notify both your company and the leaseholder, and you cannot grant consent until the objection is withdrawn or a tribunal decides. You can charge a fee to cover your costs of granting approval, and the freeholder cannot charge for considering the request. One duty people miss: once you are holding tenants' and subletting details, your company is processing personal data, which means registering with the Information Commissioner's Office as a data controller and paying an annual fee.

What is changing

Insurance is one of the areas the government has moved to reform. For years, leaseholders paid premiums quietly inflated by commissions shared between brokers, freeholders and managing agents. The Leasehold and Freehold Reform Act 2024 provides for replacing that arrangement with a transparent permitted insurance fee, charged separately from the premium and reflecting the work actually done, along with stronger rights for leaseholders to see the insurance information behind their bill. These provisions are not yet in force: they need secondary legislation, and the government published its response to the consultation on the detail in July 2025, with the regulations still awaited. It also illustrates why a building run by its own residents has the advantage here. When the people arranging the insurance are the people paying for it, there is no commission to hide.

Where this leaves you

Insurance is the one area where taking over may cost a little more, and also the one where you finally see exactly what you are paying for and why. Get cover in place for handover, go to market properly, know your excess, and keep the claims history clean. Then know where the freeholder's remaining powers begin, so nothing catches you out. It sits inside the wider role our overview of RTM director responsibilities sets out. Next in this series, the last guide, we look at what running the building day to day actually takes. And if your building has not taken control yet, check whether it qualifies.

Sources and further reading

• LEASE: Buildings insurance for right to manage companies
• LEASE: Dealing with breaches of the lease
• LEASE: Granting approvals
• GOV.UK: Permitted insurance fees for landlords, freeholders and property managing agents
• legislation.gov.uk: Leasehold and Freehold Reform Act 2024, Commonhold and Leasehold Reform Act 2002