Buildings insurance is one of the largest single items on most residential block service charges. It protects the structure of the building, communal areas and shared liabilities, and it has to be renewed every year. Increasingly, leaseholders and RTM directors are asking a sensible question about it: who, exactly, is paid when the policy is placed - and how much?
This guide explains, in plain English, how insurance commissions can work in residential block management, why they attract attention, and how East Valley Properties approaches the topic on the blocks we manage.
1. How insurance commissions work
When a buildings insurance policy is placed for a residential block, the premium is paid by the freeholder, RTM company or Resident Management Company - and recovered from leaseholders through the service charge. Behind the scenes, the broker who arranges the policy typically earns a commission from the insurer. That commission is built into the premium rather than added on top.
In a number of cases, the managing agent (or a company connected to the managing agent) also receives a share of that commission, or a separate fee, for introducing or administering the policy. This is relatively common across the industry and is not, in itself, unusual or improper. What varies between firms is how the arrangement is structured and how openly it is communicated to leaseholders.
2. Why some leaseholders raise concerns
Most concerns leaseholders raise about insurance commissions fall into four practical categories:
- Transparency. Leaseholders sometimes find it difficult to see whether a commission is being paid at all, who it is paid to, and how much.
- Disclosure. Even where commissions are disclosed, the detail can be buried in policy paperwork rather than presented clearly alongside the service charge budget.
- Conflict of interest. Where a managing agent's income depends on placing the policy through a particular broker, leaseholders reasonably want to be confident that the policy chosen is the right one for the building rather than the one that generates the most commission.
- Competitive pricing. Leaseholders want assurance that the premium reflects fair market rates and appropriate cover, rather than a price that has been shaped by the commission arrangement.
These are reasonable questions to ask, and a good managing agent should be comfortable answering them in writing.
3. East Valley Properties' approach
On the residential blocks we manage, our approach is straightforward:
- We do not take insurance commissions on the residential blocks we manage. We do not earn a share of the broker's commission, and we do not charge a separate placement or administration fee on the policy.
- Our management fees are agreed directly and transparently with the freeholder, RTM company or Resident Management Company. There are no hidden commission-based income streams sitting behind the management contract.
- Our focus is on the cover, not the commission. We work with brokers who understand residential blocks, obtain comparison quotes where useful, and make sure the policy reflects the building's actual rebuild cost, claims history and risk profile.
This is a deliberate operational choice. It keeps the relationship between the managing agent, the broker and the leaseholders straightforward - and it removes one of the more common sources of friction in residential block management.
4. Why insurance still matters
Stepping back from the commission question, the underlying point is that buildings insurance for a residential block is genuinely important. A well-placed policy quietly does several jobs:
- Appropriate cover. The sums insured should reflect a current reinstatement-cost assessment, not a figure from several years ago that has drifted out of date.
- Claims handling. When something goes wrong - an escape of water, a fire, storm damage - leaseholders need a managing agent and broker who can move quickly, log the claim accurately, and keep residents informed.
- Renewals. Renewal is the right moment to review cover, sums insured, excesses and any changes to the building. It should never be a quiet auto-rollover.
- Insurer communication. Loss assessors, surveyors and contractors all need to be coordinated. That coordination is part of the day-to-day job of a competent managing agent.
None of this depends on whether a commission is taken. It depends on whether the building is being managed by people who understand residential blocks and care about the outcome for residents.
5. Transparency in residential block management
Insurance commissions are one specific example of a broader point: leaseholders are entitled to understand how their building is being managed and how their money is being spent. That includes:
- Clear service charge budgets, presented in a format that is easy to read.
- Year-end accounts that reconcile back to the budget.
- Visibility of fees, commissions or connected-party arrangements that affect what the building pays.
- Plain-English communication when something changes - whether that is an insurer, a contractor or a major works project.
None of this is exotic. It is the operational standard a well-run managing agent should be comfortable holding themselves to, and the standard leaseholders should feel comfortable asking for.
Looking for a transparent and responsive managing agent?
Speak to East Valley Properties about block and estate management across Romford and East London. We are happy to walk through how we structure fees, how we approach insurance, and what taking over the management of your building would look like.
This article is a general guide, not legal or financial advice. Insurance arrangements vary between buildings and between firms. For specific situations, consult your managing agent, broker or a suitably qualified adviser.