Case Study
The Tenements (Scotland) Act 2004(Prescribed Risks) Order 2007
Monday 23rd June 2008
A lot can happen in 3 years: - Berti Vogts left for sunnier climes; the G8 summit resolved to take urgent action on Africa, climate change and energy; the Smoking Ban arrived; and, almost 3 years after the introduction of The Tenements (Scotland) Act, the Scottish Ministers have got around to finalising the insurance sections of the Act. They have issued an Order, in force on 1 May 2007, which effectively requires each flat owner in Scotland to have buildings insurance in place covering certain basic risks.
The background to these provisions is that section 18 of the Tenements Act requires flat owners to have buildings insurance and this came into force on 24 January 2007. The latest Order confirms the risks which must be insured against. These insurance provisions form part of the structure provided by the Act for the maintenance and management of tenements (whether commercial, residential or mixed), should there be no provision in the owner's own titles.
As of 1 May 2007, all owners of units in tenements (including commercial units) must insure against the following risks: - (a) fire, smoke, lightning, explosion, earthquake; (b) storm or flood; (c) theft or attempted theft; (d) riot, civil commotion, labour or political disturbance; (e) malicious persons or vandals; (f) subsidence, heave or landslip; (g) escape of water from water tanks, pipes, apparatus and domestic appliances; (h) collision with the building caused by any moving object originating outside the building; (i) leakage of oil from fixed heating installations; and (j) accidental damage to underground services.
The Order allows any owner to request in writing from the owner of any other flat in the tenement evidence of (i) their insurance policy, and (ii) evidence of payment of the insurance policy premium, both to be produced within 14 days.
An owner will be exempt from the obligation to insure against a particular risk, if due to the location of the tenement or other reason, he is unable to obtain insurance against a particular risk or the cost of obtaining that insurance is unreasonably high.
What is of particular note to Factoring or Property Managers is that an owner can satisfy the legal requirement from 1 May 2007, in whole or in part, by way of a common policy of insurance arranged for the whole tenement building.
Property Managers should consider whether it might be an own goal for them not to use this opportunity to remind owners that they can participate in their common / block policy. For Property Managers and owners alike, this could be a win-win situation as a common policy usually results in considerably cheaper insurance for owners. For those who may have a bad claims history or cannot find low cost insurance, the Property Manager's block policy potentially offers a cheap and easy way for them to comply with the new law. Owners can be secure in the knowledge that all other owners in the building have proper insurance in place.
For further information contact Neil McNamara at TC Young on 0141 225 2571 or nxm@tcyoung.co.uk