21 November 2025

Buildings Insurance

Written by: factors

Likely to be the single biggest annual cost, it’s worth getting this right.

It’s a legal requirement

As with so many other things the starting point is your Title Deeds – they are almost certainly going to say that it’s a requirement to insure your tenement or development, including all common parts. Most likely the Deeds are also going to say that a common policy (one overarching insurance policy where each owner pays a proportion of the premium) is the requirement.

But if your Deeds are silent on insurance then you aren’t “off the hook” for insurance, because the Tenements (Scotland) Act 2004 also applies to you (whether you knew it or not!). This Act requires all owners of properties with common areas (whether or not you’d normally describe your home as in a tenement) to cover the reinstatement value (the cost to rebuild) through a buildings insurance policy

Can’t I just arrange my own policy?

For various reasons (perceived incompetence of the factor, perceived unfair apportionment of premium, feeling that they can achieve better value for money), some owners may want to arrange their own buildings insurance and include an element that takes account of their proportion of shared (common) areas. Can they legally do so?

The answer is maybe, in certain circumstance, but it it really a smart idea?

Firstly, what a Common (or Block) Policy is. It’s where one policy covers the entire building including all individual properties (flats) and all common parts (stairwells, shared spaces, gardens etc). Whereas individual policies are where a homeowner takes out a policy covering just their property plus the appropriate proportion of their responsibility for common areas (so maybe 1/20th where the development consists of 20 flats).

We can immediately see several issues with individual policies, including:

were the common parts correctly valued?
it becomes very messy if a claim arises for a common parts area as multiple insurance policies will be asked to contribute a proportion each.
have the other owners insured the common parts on the same basis?
with flats it’s unlikely that one flat’s buildings insurance claim won’t also impinge upon adjoining flats.

So common policies are definately the preferred option, but in certain circumstances individual policies are allowed under the law (but that still doesn’t mean that they are sensible in reality).

If the Title Deeds require a common block policy then you’ve basically got to go along with that This is the strongest restriction. If the deeds explicitly state that all owners must participate in a common insurance policy, then an individual owner cannot legally opt out. This provision is designed to ensure the entire building is adequately covered and that claims are straightforward.

If the deeds are silent, or potentially permit individual policies then you need to turn to the rules of The Tenements (Scotland) Act 2004. The Act sets out some rules:

Individual policies are permissible only if the Title Deeds allow it, and if a majority decision has not been made to arrange a common policy.
But, under the Tenement Management Scheme (the default rules under the Act), owners can make a scheme decision (usually by simple majority vote) to arrange a common insurance policy. Once this decision is made, all owners are bound to participate and pay their share.

Oh, and the other thing is that if you decide to go down the individual policies route, you might find it difficult to find insurers willing to underwrite the policy because claims would potentially be very messy to administer.

If a factor takes the lead

If, as is most likely, you use a property factor and they are given the role of arranging the common insurance policy, either because that was mandated in the Title Deeds, or because owners decided upon it, then they need to:

be transparent at all stages with owners, about options and potential costs in particular.
obtain a Reinstatement Cost Assessment at the appropriate periodicity (currently every 3 years), by employing the services of an appropriately qualified surveyor.
obtain an acceptable number of quotes.
handle renewals in a timely fashion.
collect premium in accordance with the agreed apportionment.
manage claims.

And they must communicate to owners

Factors must provide owners with clear information, including how their share is calculated, the total sum insured, the name of the insurer, a copy of the insurance certificate (and on request a copy of the policy) and must disclose any commission or administration fees they will receive.

Reinstatement Value and Underinsurance Risk: Emphasise the importance of insuring for the full reinstatement value (the cost to rebuild from scratch, which is often not the same as the market value). Highlight the severe risk and financial consequences for all owners if the building is underinsured.

Another area that I’ll try to write about is whether VAT needs to be added to the insured value, or not. This is a contentious area in UK buildings insurance at the moment but at the very least your factor needs to be transparent with owners as to whether, or not a “VAT uplift” has been added and why – giving the owners the option to make a fully informed decision.

But buildings insurance doesn’t cover

But of course communal buildings insurance generally covers the structure and common parts only. It does not cover contents (furniture, belongings) or internal decorations inside the flat—owners will need separate contents insurance for these aspects.