As I am sure you know, the cost of building insurance for multi-unit developments (MUDs) has more than doubled in the past few years. In my case, my development comprises own-door units and three blocks. Our premium last year was €23,000, but the premium jumped this year to nearly €50,000. The blocks have significant deviations from the fire regulations and need remedial works which hopefully will be covered by the upcoming Government scheme. My question is whether the insurance cost should be split equally between all 96 units, or whether the apartment-block unit owners should bear most of the cost, as that is where the risks have been identified?
Your query touches on several issues. In relation to block insurance premiums for MUDs in Ireland, you are correct that these have risen significantly in recent years. In many apartment or mixed-use developments, a doubling in premiums has occurred.
A core cause has been a significant rise in reinstatement values (the cost of rebuilding the development from zero if required), which feeds directly into the premium. This is partly linked to cost inflation for materials and labour, and has coincided with a reduced number of underwriters willing to provide block policies to MUDs in Ireland.
There have been some indications of late that the sharp increases we’ve seen over the last couple of years are easing, but it is too early to be definitive on that. Given the importance of insurance in the budgets of owners’ management companies (OMCs), these increases in premiums have been a key driver of higher service charges for property owners in recent times.
RM Block
As such, a first task would be for you to understand the precise reasons behind the jump in premium that your OMC has experienced. What has been the increase in the reinstatement costs in recent years? Has there been an increase in claims as the MUD got older, or was there a particularly large claim last year, perhaps?
The above will help you understand what part of the increase is down to the fire safety issues identified. It is also worth asking the managing agent or OMC board whether they had a discussion with the insurance underwriter (or broker) about applying higher excesses on fire-related claims until the remedial works are completed. This approach has been adopted by some underwriters/OMCs as a way to limit increases in the premium.
You mention Government plans in relation to a scheme for the remediation of defects. An interim scheme for Fire Safety Defects in Eligible Apartments and Duplexes has been established, and details are available from the Housing Agency website. It may be that your OMC could make an application under this scheme. In relation to a more comprehensive long-term scheme, the 2025 Programme for Government commits to “legislate and implement” such a scheme, and draft legislation is awaited in this regard.
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In relation to the allocation of the cost of the higher insurance between the different kinds of property owners, typically, the property leases will specify that the OMC must insure the entire development – including apartment blocks and associated common areas – for the full reinstatement cost.
This cost is then apportioned among unit owners according to the percentages set out in their leases. The apportionments will often have been fixed when units were first sold and are not easily altered. While this can mean that own-door unit owners contribute to costs arising from risks located mainly in apartment blocks, that is consistent with how most OMCs operate.
A distinction is that future works not covered by the planned Government scheme (eg fire safety upgrades – as opposed to remediation of defects – or structural repairs) could potentially be separated out and funded by way of a levy on relevant owners, rather than through the general service charge.
If the own-door units are facing an increased share of common costs arising mainly from apartment block issues, and this is creating a sense of unfairness, it might be that the OMC could look at some works that could more directly benefit the houses, such as external maintenance, landscaping or decorative works.
Finbar McDonnell is a chartered property manager and a member of the Society of Chartered Surveyors Ireland
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