If you live in a leasehold flat or own property in a flood-prone area, the rules your local authority follows can directly affect how much you pay for insurance — and whether you can get cover at all. A 2023 Financial Conduct Authority report found that broker remuneration on buildings insurance rose 40% between 2019 and 2022, with many brokers unable to explain what services justified those commissions. That cost gets passed straight to leaseholders through higher premiums.
Disclosure: Some links on this page are affiliate links. If you make a purchase through them, Britwealth may earn a commission at no extra cost to you. We only include products and services that are relevant to the topic.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Local authorities are now rethinking how they manage property risks, with some properties in flood plains or coastal zones becoming uninsurable through standard markets. At the same time, the Leasehold and Freehold Reform Act 2024 gives the government power to ban hidden commissions on buildings insurance, replacing them with transparent “permitted insurance fees.” The consultation on these changes ran from December 2024 to February 2025, drawing 836 responses — over 84% from leaseholders. The government has confirmed it will move forward with the new fee structure. Here’s what you actually need to know.
Key Takeaways and What “Permitted Insurance Fees” Actually Means
The central concept here is permitted insurance fees — a fixed, transparent charge that freeholders and property managing agents can levy for specific insurance-related activities, instead of hidden commissions. The government consultation outcome confirms these fees will replace the old commission model.
What I tend to notice is that most leaseholders have no idea how much of their service charge goes to insurance commissions. The new rules aim to change that, but the details — what counts as a permitted activity, how VAT applies — are still being worked out.
How Local Authority Rules Affect Insurance Costs and Availability
Local authorities don’t just manage council housing — they also influence insurance markets through planning decisions, flood defence investment, and how they handle risk disclosure. Properties in high-risk areas face the steepest challenges. The Strategic Risk Global report notes that many local authorities are reassessing how they transfer insurance costs to taxpayers, with some properties becoming uninsurable in the standard market.
Here’s how the different risk categories typically affect premiums and availability:
→ Scroll right to see all columns
| Risk Category | Typical Premium Impact | Availability |
|---|---|---|
| Flood plain (high risk) | 2x–5x standard rates | Limited — many insurers decline |
| Coastal zone (erosion risk) | 1.5x–3x standard rates | Moderate — specialist insurers only |
| Standard urban (low risk) | Baseline rates | Widely available |
| Post-redevelopment (improved defences) | Rates may drop 10–20% | Improves with certified defences |
For a leaseholder in a high-risk flood zone, the difference between a standard premium and a risk-adjusted one could mean paying £2,000–£5,000 more per year through the service charge. That’s real money that goes straight to the insurer or broker, often without the leaseholder ever seeing the breakdown.
Common Errors and Gaps in Understanding Local Authority Insurance Rules
Assuming Standard Home Insurance Covers Leasehold Buildings
If you’re a leaseholder, your contents insurance won’t cover the building structure — that’s the freeholder’s responsibility. But the freeholder’s policy is paid through your service charge, and if it’s loaded with broker commissions, you’re overpaying. The new permitted insurance fee rules aim to fix this, but until they’re fully implemented, check your service charge breakdown for any insurance-related line items. If you see a vague “insurance arrangement fee,” that’s worth questioning.
Ignoring Flood Risk Disclosure When Buying
Local authorities hold flood risk data, but it’s not always passed to buyers. If you purchase a flat in a flood zone without knowing, you could face a shock when the building insurance premium triples. The ECTraders analysis notes that property law changes affecting liability definitions cause insurers to reassess risk and adjust premiums. Always check the Environment Agency’s flood maps and ask the local authority directly about flood defence plans before buying.
Believing the Freeholder’s Insurance Is Always the Best Deal
Freeholders often use a single broker for all properties in a block, and that broker earns commission on every policy. The FCA found that broker remuneration rose 40% between 2019 and 2022, with many brokers unable to justify the fees. Leaseholders rarely have a say in which insurer is used. Under the new rules, you’ll be able to see exactly what the permitted fee is — but you still won’t be able to shop around yourself unless the lease gives you that right.
Missing the Deadline to Challenge Insurance Charges
If you think your service charge includes excessive insurance costs, you can challenge it at the First-tier Tribunal (Property Chamber). But there are strict time limits — usually within 12 months of the charge becoming due. Many leaseholders miss this window. Keep every service charge statement and note the date you received it. If the insurance component seems high, act quickly.
Practical Steps to Navigate Local Authority Insurance Rules
Understanding Your Lease and Insurance Obligations
Your lease will specify who arranges buildings insurance — usually the freeholder or management company. It may also cap the insurance cost that can be passed to you. Read the insurance clause carefully. If it says “reasonable cost” or “market rate,” you have grounds to challenge excessive charges. The UK home insurance regulations guide covers what to look for in these clauses.
How the New Permitted Insurance Fees Will Work
Under the Leasehold and Freehold Reform Act 2024, the government will phase out broker commissions and replace them with permitted insurance fees. These fees must be for specific, defined activities — arranging the policy, handling claims, or managing risk assessments. The government consultation received 836 responses, with 708 from leaseholders. The outcome confirms the move forward, but unanswered questions remain around VAT treatment and exactly which activities qualify. Expect secondary legislation to clarify these details.
What to Do If Your Property Is in a High-Risk Area
If your local authority has designated your area as flood-prone or coastal erosion zone, don’t just accept the first insurance quote. Ask the freeholder or managing agent to get multiple quotes from specialist insurers who understand the local risk. Some authorities are exploring captive insurance arrangements — where the authority itself retains some risk — which can stabilise premiums. Push your local councillor or MP to ask what the council is doing about insurance affordability in your area.
Emerging Rules on Transparency and Disclosure
Regulators are pushing for greater transparency in how local authorities account for insurance liabilities. This means councils will need to disclose more about their risk assessments and insurance costs. For leaseholders, this is a chance to see exactly what you’re paying for. The property insurance excess guide explains how excess levels interact with premium costs in the current market.
Frequently Asked Questions
Can I challenge my freeholder’s insurance choice if I find a cheaper quote? ▾
Will permitted insurance fees be cheaper than commissions? ▾
Does the new law apply to all leasehold properties in the UK? ▾
What if my local authority doesn’t have a flood defence plan? ▾
Can I get buildings insurance myself if the freeholder’s policy is too expensive? ▾
When will the new permitted insurance fee rules take effect? ▾
What the Shift to Transparent Insurance Fees Means for Your Property Costs
The move from hidden commissions to permitted insurance fees is one of the biggest changes to leasehold property costs in years. But it won’t fix everything — local authority risk assessments, flood defences, and planning decisions will still determine whether your building is affordable to insure. The 40% rise in broker commissions between 2019 and 2022 shows how quickly costs can climb when no one is watching. The new rules give you a way to watch, but you still need to act.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read UK homeowners: are you accidentally voiding your property insurance?
Sources and Further Reading
Top tips for understanding UK home insurance regulations — A practical guide to the regulatory landscape affecting property insurance policies.
The ultimate guide to choosing the right property insurance in the UK — How to compare policies and understand coverage in the current market.
Strategic Risk Global (2024). UK local authorities are rethinking their insurance approach, but risks abound. 🔗
UK Government (2025). Permitted insurance fees for landlords, freeholders and property managing agents: government response to consultation. 🔗
Propertymark (2025). New rules set out on insurance fees for freeholders and agents. 🔗
ECTraders (2024). How can changes in UK property laws impact insurance premiums? 🔗
