The Law Society’s primary focus in the response relates to those properties excluded from the scheme. Given that the government’s stated objective has been to ensure that domestic property insurance continues to be widely available and affordable in areas of flood risk, it is difficult to accept that many will be excluded from the scheme.
For example, many long leaseholders will fall into this category and be excluded from having access to the benefit of the scheme. The fact that the exclusion of this group of homeowners rests, not on the differentiation as between commercial and residential properties, but on the manner in which the insurance industry identifies and classifies domestic and commercial policies in underwriting terms, appears to run counter to the broad objective of government here.
None of these types of property will be eligible for flood cover backed by the Flood Reinsurance Scheme. Instead the owner or occupier will need to obtain flood insurance in the open market on whatever terms they can acquire, possibly with high premiums, excesses and other onerous conditions, and possibly fail to do so.
The scheme excludes:
- All business premises. The previous scheme, the Statement of Principles, recognised that SMEs need to have access to affordable cover.
- All properties that have a Council Tax banding post – 1 January 2009, ie ‘new builds’ built since the start of 2009.
- Council Tax Band H homes.
- Flats in purpose built blocks, because the insurance underwriting on such blocks classifies this insurance to be commercial rather than residential. Buy-to-let residential properties where the landlord arranges the buildings insurance are excluded for the same reason, i.e. they are not ‘home insurance policies’.
- All those flats that do not fall within the narrow definition that was meant to permit flats in converted houses to benefit from the scheme.
Further work may need to take place by the government and the insurance industry in relation to communications to prospective buyers about the properties that are to be excluded from the scheme.
If you want to know more…
…about the Flood Re Scheme, see the article ‘After the flood’, in the May 2014 edition of the Property Section’s magazine, Property in Practice. See above to access the article. Usually only accessible to Section members, you can access this article free exclusively from this site whether or not you are a member. Keep an eye out for more exclusive-access articles on our magazine pages.