Homeowners stuck in flats with flammable cladding forced to pay huge insurance costs

Desperate homeowners living in low-rise flats with flammable cladding claim they have been stuck with massively inflated insurance fees since the Grenfell disaster.

Residents of Picton in Victoria Wharf, Cardiff, claim the city's council has the power to save them from inflated insurance costs charged by a sister-company to the building's manager FirstPort.

They claim the overall cost of insurance has increased almost tenfold, from (£67,000 to £624,000 per year) for all seven Victoria Wharf blocks since the cladding scandal, and management company FirstPort does not dispute this.

Picton resident Deborah Polverino explained: "Everybody that lives in these blocks is concerned and there are some people that lost their jobs in the pandemic, so it's harder for them and I know a lot of people have been really stretched financially.

"There's a mixture of people who want to stay and leave. There are some people who'd happily be here forever but they want to know that they feel completely safe in their home and they want the charges to go down. The biggest problem is that for anybody who wants to sell, even if the cladding work is done, if we don't get the insurance costs and service charges down then who is going to buy the property?"

Deborah said that between insurance, service charges and additional charges for alarm systems, residents are paying "more than most people's mortgages" to live in the flats - which were found in 2020 to have flammable cladding.

The cost of living in Deborah's three-bed flat, before mortgage, bills and food:

• Service charge: £504/month including insurance: £143.75/month

• Cost of installing heat detection system: £140/month

The costs of the service charge and heat detection system are a huge burden on residents but the insurance is the worst of it.

Peter Larwood, chair of the Victoria Wharf Residents' Association, said: "What’s happened is our insurance went up for all seven blocks, a substantial increase that has to be met by all the leaseholders.

"The insurance is due for renewal in September every year, which is why this is important right now. Because our insurance went so high, we looked at how we could challenge it. As leaseholders we had no real right of challenge but we looked around and spoke to the politicians. From that, we were offered the services of Cardiff Council to see if they could attain better deals."

Residents wrote to politicians including Rhys ab Owen MS, who requested that Cardiff council see if its own brokers could get a better deal than what residents were being given by FirstPort.

He received a reply from Labour councillor Lynda Thorne, the cabinet member for housing and communities. She said: "I did indeed offer the services of the council's help as FirstPort were having difficulty getting insurance and our Insurance and Risk Manager made contact with FirstPort to try to assist.

"FirstPort contacted us on 1st September 2020 to advise that the insurance was in place. Whilst no guarantees can be made that the Council's insurance brokers would be able to better the cover that FirstPort currently have, the council can introduce FirstPort to their brokers to ascertain what cover could be obtained."

As far as residents are aware, FirstPort has not reached out to the council. A FirstPort spokesperson said: "FirstPort Insurance Services Ltd has previously advised the Council that they already work with a market-leading wholesale broker specialising in residential real estate to access markets for this placement."

FirstPort's broker is called FirstPort Insurance Services. Residents are worried that FirstPort could be using its own choice of broker in order to make a commission off the insurance being charged.

Peter Larwood said: "FirstPort use their own in-house brokers. Any insurance that they negotiate, they will get commission on. What we do know is that Prospect Place’s insurance is substantially less than us. There are more blocks and they’re covered in the same cladding Grenfell had and they’re not subject to a waking watch patrol.

"Celestia, which is in the Bay, has far worse problems than we do, and their insurances are substantially less than ours. We are stuck with a managing agent using their own broker to obtain our insurance, saying they can’t obtain them anywhere else at a better price, but because they’re a broker they will earn commissions on policies that they underwrite."

In response to these claims, a FirstPort spokesperson said: "Whilst it is noted that FirstPort is utilising the services of FirstPort Insurance Services Ltd (FISL), an authorised and regulated insurance broker, there is no conflict of interest in doing so. FirstPort Property Services as the property manager receives no income from insurance placement. Residents are aware that FISL waived its commission for the 1st September 2020 building placement to support them."

FirstPort also confirmed that FirstPort Property Services and FirstPort Insurance Services Limited share a parent company. It also confirmed that FirstPort Insurance Services does not insure all of FirstPort's properties.

The spokesperson continued: "The insurance market across the UK has become particularly challenging for high-rise multi-occupancy buildings. The building insurance for Victoria Wharf has been impacted by the significant presence of combustible materials, compartmentation issues, and the accumulation of insurable risk, while also taking into account the close proximity of five of the buildings, as well as the potential problems around access to those buildings backing onto the river. As a result, this has caused an increased insurance premium for residents."

The problem only gets worse when you add in the rest of the service charge and the additional costs of the heat detection system, which result in residents paying more than £600 monthly on top of their mortgages and before their household expenses. The service charge includes maintenance of lifts, fire and electrical equipment as well as a variety of other repairs and maintenance and the salaries of onsite staff.

It has increased since the start of the cladding scandal and risen from £470 in the previous year because Picton is one of the blocks that employs a waking watch service. This service means the building is constantly patrolled to make sure residents get sufficient warning of any fire, but residents say the service is bad value for money and have suggested that a CCTV system would be more efficient.

A spokesperson for FirstPort said: "We have received clear guidance by an independent fire engineer, and in consultation with South Wales Fire and Rescue Service, that an interim Waking Watch is the correct course of action to keep residents safe."

The charge for a heat detection system was initially not going to be levied on residents. FirstPort had claimed it would be covering the full cost before residents were hit with a Section 20 notice saying money would be taken from them each month (£140 for Deborah) until the required share of it had been paid by each of them.

Deborah claims that, after FirstPort initially said its reserves would cover the £91,746 cost of installing the system, it was found that there was only £988.66 in the reserve fund. FirstPort disputes the £140 figure but Deborah says this is the amount she has to pay until her £2,700 share of the overall cost is paid off.

A spokesperson for FirstPort replied to these claims, saying: "Unfortunately, there were not enough funds in the reserve fund to cover the project. We are sorry that a previous communication, sent prior to the accounts being reconciled, stated otherwise."

Residents are frustrated that they, rather than the management company, are having to pay to make the flats safe to live in. The company that built Picton has since been absorbed by Taylor Wimpey, which has committed to bring it (and other buildings) up to a B1 rating (meaning a mortgage should be obtainable without caveats or requirements of more remediation). The matter of fire safety including cladding and external walls still falls to the management company and the freeholder.

Deborah said: "Over the last two and a half years I’ve kind of come to a place of acceptance but I know there are people who feel scared and I can’t speak for others in the block. Every person in this block is all going to have their own frustrations but it’s not just about the extra money that we’re paying.

"It’s the fact it’s taking so long and it’s very stressful, especially for people who are taking in lodgers or taking on second jobs just to afford the service charge. Ideally, I'd like FirstPort to take action."

Peter added: "It’s the human cost - the stress and the anxiety. I had a friend who was on benefits and physically couldn’t afford to pay.

"He’s got a job now, but he fears the bills as they come in because they’re so high, as we all do. I’m 72 years old, I have my company pension and my state pension, and I wonder how I’m going to find the money. That’s before heating, lighting, food, council tax - around £400 to FirstPort. I see the emails from people who support the actions I’m trying to take, who can’t afford to go on like this."

'We understand the urgency'

FirstPort's spokesperson said: "As the property manager for Victoria Wharf, we are continuing to do all we can to support residents through this process. We are in regular communication with residents to ensure they are updated on any progress at the development. Taylor Wimpey has committed to carrying out the remediation works at Victoria Wharf. We understand the urgency and as soon as next steps and timescales for the works have been agreed, we’ll update residents.

"We have also submitted all applications and documents relating to each of the seven blocks to the Welsh Government’s Passport Scheme and all parties are awaiting further updates on this, which is expected late Summer 2022."

A spokesperson for Taylor Wimpey said: "Taylor Wimpey has committed and set aside significant funding to ensure leaseholders do not have to pay for remediation works to bring their buildings up to current EWS1 standards, and this includes Victoria Wharf. We understand this is a difficult situation for residents and we remain in contact with FirstPort, the Management Company at Victoria Wharf, to agree a suitable scope for remedial works.”