London flat-owners are being regularly ripped off by their managing agents, who charge them excessive amounts for buildings insurance. The agent or the freeholder then collects a nice sum for themselves in commission for giving an insurance company the business. They do not pass this commission on to the flat-owners. And they do not have to disclose this fact to the residents.
The practice is going on all over London, claims chartered surveyor Roger Southam, former president of the Royal Institute of Chartered Surveyors (RICS). He says the institute should crack down on the tactic.
Southam raised the issue more than a year ago after press reports about it. He was given the task of investigating the practice by the then president, Graham Chase. But since then he has met with nothing but obstruction from the RICS, he told Homes & Property.
“I have spoken with various people in the RICS executive office, only to be told they’ll get back to me,” he said. “They keep saying they aren’t ready to start the working party. So I decided to blow the whistle.”
Mr Southam discovered the problem when the freehold of Boardwalk Place, E14, a property his company Chainbow was managing, was sold in September 2005 to a company controlled by Vincent Tchenguiz. The new company demanded insurance amounting to more than £100,000 for 370 flats and houses in seven blocks.
“I went to a broker and got a quotation for £60,000, including a 20 per cent commission for the agent or freeholder,” said Mr Southam.
The Government is considering forcing the disclosure of more details of service-charge accounts, but says this would not include details of insurance commissions.