Can new RTM company change insurance mid-year?

[Buckets]

Hi there,

We are currently in the process of setting up an RTM company to take over the management of our block. Main reason for this is the expensive insurance. The Freeholder has taken out a blanket insurance which isn't the best deal for us.
1. The current insurance runs until June 2011 but can this be terminated once the RTM Company takes over the management, or are we tied into the insurance?
3. The claims are currently handled by the managing agents which would also go with the RTM "takeover". I think they are earning commission for all the claims handled so if we are stuck with the insurance what happens to this commission?

Thanks!!

[leaseholdanswers]

Hi there,

We are currently in the process of setting up an RTM company to take over the management of our block. Main reason for this is the expensive insurance. The Freeholder has taken out a blanket insurance which isn't the best deal for us.
1. The current insurance runs until June 2011 but can this be terminated once the RTM Company takes over the management, or are we tied into the insurance?
3. The claims are currently handled by the managing agents which would also go with the RTM "takeover". I think they are earning commission for all the claims handled so if we are stuck with the insurance what happens to this commission?

Thanks!!

RTM cancels ALL contracts. You can start afresh.

Agents dont earn commission on claims. They only do so on introducing business to an insurer or broker. You have no liability for that. Any admin costs, which are rare these days, and surveyors fees on larger claims are the responsibility of the insurer to pay out.

BUT you must get a list of outstanding claims, as if the excess is going to recharged to the service charge, that you know about this and that it is in the landlords final set of accounts. Eg A mains pipe leaks and there is an excess of £750 when the claimis settled. The landlords final service charge accounts should include this.

[jeffrey]

RTM cancels ALL contracts. You can start afresh.
Not necessarily. It depends on s.91/92 re 'management contracts' and Notices relating to them.

[Buckets]

Not necessarily. It depends on s.91/92 re 'management contracts' and Notices relating to them.

I was already doing the jig here but then saw this. Can you explain further?

[jeffrey]

91. Notices relating to management contracts
(1) Section 92 applies where:
(a) the right to manage premises is to be acquired by a RTM company (otherwise than by virtue of an order under section 85), and
(b) there are one or more existing management contracts relating to the premises.
(2) A management contract is a contract between:
(a) an existing manager of the premises (referred to in this Chapter as the “manager party”), and
(b) another person (so referred to as the “contractor party”),
under which the contractor party agrees to provide services, or do any other thing, in connection with any matter relating to a function which will be a function of the RTM company once it acquires the right to manage.
(3) And in this Chapter “existing management contract” means a management contract which:
(a) is subsisting immediately before the determination date, or
(b) is entered into during the period beginning with the determination date and ending with the acquisition date.
(4) An existing manager of the premises is any person who is:
(a) landlord under a lease relating to the whole or any part of the premises,
(b) party to such a lease otherwise than as landlord or tenant, or
(c) a manager appointed under Part 2 of the 1987 Act to act in relation to the premises, or any premises containing or contained in the premises.
(5) In this Chapter “determination date” means:
(a) where there is no dispute about entitlement, the date specified in the claim notice under section 80(6),
(b) where the right to manage the premises is acquired by the company by virtue of a determination under section 84(5)(a), the date when the determination becomes final, and
(c) where the right to manage the premises is acquired by the company by virtue of subsection (5)(b) of section 84, the day on which the person (or the last person) by whom a counter-notice containing a statement such as is mentioned in subsection (2)(b) of that section was given agrees in writing that the company was on the relevant date entitled to acquire the right to manage the premises.

92. Duties to give notice of contracts
(1) The person who is the manager party in relation to an existing management contract must give a notice in relation to the contract:
(a) to the person who is the contractor party in relation to the contract (a “contractor notice”), and
(b) to the RTM company (a “contract notice”).
(2) A contractor notice and a contract notice must be given:
(a) in the case of a contract subsisting immediately before the determination date, on that date or as soon after that date as is reasonably practicable, and
(b) in the case of a contract entered into during the period beginning with the determination date and ending with the acquisition date, on the date on which it is entered into or as soon after that date as is reasonably practicable.
(3) A contractor notice must:
(a) give details sufficient to identify the contract in relation to which it is given,
(b) state that the right to manage the premises is to be acquired by a RTM company,
(c) state the name and registered office of the RTM company,
(d) specify the acquisition date, and
(e) contain such other particulars (if any) as may be required to be contained in contractor notices by regulations made by the appropriate national authority,
and must also comply with such requirements (if any) about the form of contractor notices as may be prescribed by regulations so made.
(4) Where a person who receives a contractor notice (including one who receives a copy by virtue of this subsection) is party to an existing management sub-contract with another person (the “sub-contractor party”), the person who received the notice must:
(a) send a copy of the contractor notice to the sub-contractor party, and
(b) give to the RTM company a contract notice in relation to the existing management sub-contract.
(5) An existing management sub-contract is a contract under which the sub-contractor party agrees to provide services, or do any other thing, in connection with any matter relating to a function which will be a function of the RTM company once it acquires the right to manage and which:
(a) is subsisting immediately before the determination date, or
(b) is entered into during the period beginning with the determination date and ending with the acquisition date.
(6) Subsection (4) must be complied with:
(a) in the case of a contract entered into before the contractor notice is received, on the date on which it is received or as soon after that date as is reasonably practicable, and
(b) in the case of a contract entered into after the contractor notice is received, on the date on which it is entered into or as soon after that date as is reasonably practicable.
(7) A contract notice must:
(a) give particulars of the contract in relation to which it is given and of the person who is the contractor party, or sub-contractor party, in relation to that contract, and
(b) contain such other particulars (if any) as may be required to be contained in contract notices by regulations made by the appropriate national authority,
and must also comply with such requirements (if any) about the form of contract notices as may be prescribed by such regulations so made.

[leaseholdanswers]

I was already doing the jig here but then saw this. Can you explain further?

What it means is an expansion of my summary post, is how RTM cancels all contracts,so;

INSURANCE: Brokers will cancel a policy mid year. Depending on the arrangements part of the premium may be refunded, certainly a landlord will be unlikely to want to affect his policy with your losses (if any). I have not had one yet that refused to pro rata the premium.

As part of the process notice must be given to all parties with a contract normally by the landord or their agent.

The RTM company asks for a list of contracts and confirmation that notice, and the terms of notice, has been served.

If a contract has say a three month notice clause then
1: They cannot require you to retain them after RTM
2: But they can insist on their three month notice fee.

We have not yet had a company challenge termination, even the more aggressive companies who rent say entryphones. Often it is advantageous to consider if a transitional phase might be sensible giving you time to locate other suppliers or carry out statutory consultation under "section 20" of thelandlord and tenant act 1985

[paulb67]

Hi Buckets

Some other things to consider.

The insurer may not allow you to continue with the current insurance arrangements anyway. You are a different legal entity and the insurance may be for the original freeholder only.

It would probably be in your interest to arrange issue of a new policy. If you take over the existing policy and the freeholder has arranged the cover incorrectly or failed to disclose material facts, you will lose out and probably not have any recourse against the freeholder.

It maybe that you want wider cover than the freeholder has arranged. Some freeholders have polciies with large excesses as they don't want the hassle of dealing with smaller claims. You might not want such a large excess.

You need to try and obtain claims information. Last 5 years is ideal and don't forget subsidence claims need to be disclosed regardless of when the claim was made.

If there have been claims since renewal, no refund of premium may be available.

Will the managing agent continue to handle outstanding claims once you have formed the RTM.

Will the managing agents/brokers commission be deducted from the insurer refund. Check their Terms & Conditions to see if this might be the case.

If there's a D&O policy it's unlikely that a refund will be given, but you might be lucky.

One point Leseholdanswers makes that I don't agree with. I've seen some managing agents charge fees for handling insurance claims. These aren't usually covered by the insurer.

[leaseholdanswers]

One point Leseholdanswers makes that I don't agree with. I've seen some managing agents charge fees for handling insurance claims. These aren't usually covered by the insurer.

Sorry that was the point that I was making that insurers just wont accept these as routine any more not the the good old days of 87 and 90! I appreciate the clarification.They might charge a fee ( as opposed to a commission as posted) as part of their management agreement/role, however as I have successfully argued, if you have a brokerage commission, why should you charge twice? additionally as another point of general interest , if the agent is not obligated to deal with individual flat claims under their management agreement, they cannot simply assume responsibility and a fee.

[Gordon999]

Hi there,

We are currently in the process of setting up an RTM company to take over the management of our block. Main reason for this is the expensive insurance. The Freeholder has taken out a blanket insurance which isn't the best deal for us.
1. The current insurance runs until June 2011 but can this be terminated once the RTM Company takes over the management, or are we tied into the insurance?
3. The claims are currently handled by the managing agents which would also go with the RTM "takeover". I think they are earning commission for all the claims handled so if we are stuck with the insurance what happens to this commission?

Thanks!!

After the freeholder admits the RTM can take over the service charge account, then after the agreed handover date, the RTM company becomes responsible for insurance and can start a new insurance policy for the building.

The existing policy wll be terminated by the landlord /freeholder and leaseholders should claim back a pro-rata sum for the cancelled portion of the terminated cover.

You can ask for a declaration of commssion taken under the current and previous year's insurance policy ( but you may not get any reply )..

[jeffrey]

No different from any other insurance- always cancellable during an insurance year (but insurer may deduct admin. fee before refunding apportionment).

[Gordon999]

Actually the inurance policy must be terminated by the named policy holder and this won't be the incoming RTM company.