Managing the risk: the critical role of property managers in insurance claims

December 18, 2025

As many of us who service claims near major city centres have surely noticed, high-rise residential buildings are being constructed with increasing speed and frequency. Manchester and neighbouring Salford, for example, both have dramatically altered skylines. Deloitte’s Manchester Crane Survey ¹ revealed that, as of 2024, there were 10,788 homes under construction, set for delivery over the next four years. This activity is being dominated by residential tower blocks, student apartments and build-to-rent schemes.

The pace of construction is directly affecting developers’ financial risk exposure and market competitiveness. Time pressures on construction contracts, options available for adopting modern construction methods and cost restraints have all impacted on build quality. This has given rise to various sources of water damage and long-term structural building defects; the most common cause of resultant escape of water claims is poor workmanship — often the result of using a low-cost, sub-contract workforce.

The cost and frequency of escape of water claims have been rising, with steady increases of 21–28% between 2015 and 2017². More high-rise apartments and more bathrooms per property have contributed to this increased claim frequency and severity.

Construction shortcuts and an increase in claim numbers are exposing issues hindering effective claims handling, for example the role and responsibility of the block property manager and their influence on the claim process.

A property manager’s responsibilities when insurance claims arise can vary depending on the terms of the agreement that govern their role. Recently we’ve seen their function increase exponentially, extending to risk management, construction management, compliance and resident engagement³. The extent of their involvement can range from cradle-to-grave claims management to distancing themselves entirely from the process, merely guiding leaseholders towards claims reporting processes.

The property manager’s involvement in block development claims can greatly affect how quickly claims are progressed, the ultimate severity of the damage and eventual claim spend. A less-engaged property manager can lead to delayed notification of claims, unmitigated damage and can potentially impact policy liability.

In our experience at Sedgwick, we’ve seen that insurers usually respond generously, refusing to allow leaseholders to be penalised for failures on the part of the property manager — but this is not always the case. Whether because of increasing portfolios stretching management personnel or dwindling service charge funds, the failure to repair uninsured property damage (such as wear and tear or building defects) in a timely manner leads to unmitigated damage to leaseholder-owned units, increasing repair costs and rent losses.

With the highlighted increase in quick-builds and poor methods of construction, certain categories of building defects, such as those involving external cladding, can be costly and far exceed reserves held within sinking funds, which are often in arrears. Such cases can span years; in some cases, rent losses exceed the maximum indemnity period (MIP) for loss of rent cover, putting leaseholders in a precarious position and leading to the general deterioration of buildings.

In one recent example, water had entered into several units within a block of flats as a result of defective cladding installation. Because the damage fell outside the defect period and outside the policy cover, the property managers had no option but to instruct contractors on behalf of leaseholders to provide costs for the remedial works. Those submitted costs were not insignificant and the only source for funding (beyond loans, which would have exacerbated their financial position long-term), was the service charge account. In this case the cost per unit was untenable for most leaseholders, and far outweighed the annual fund reserve. With the end of the MIP fast approaching, the issue remains unrectified and the internal damage remains unrepaired. The deteriorating condition of some communal areas is affecting opportunities for other buy-to-let leaseholders to attract new tenants.

Although this could be considered an extreme example, we see the principle repeated time and time again. Roofs are not being maintained or repaired adequately due to financial constraints, often leading to repeated water ingress claims. It is becoming increasingly apparent that some of these claims, though submitted as storm claims, could have been preventable had the property been well maintained. In these cases, we again see insurers responding generously by paying claims for internal damage — but increasing excesses to a level that directly affects the leaseholders.

As of October 2014, property managers in England are legally obligated to register with one of the government-approved redress schemes. This provides leaseholders and freeholders with access to an independent authority through which they may lodge service complaints.

A number of recent and upcoming legislative and regulatory changes in the UK, such as the Building Safety Act 2022, have significantly increased the duty of care for property managers. This shifts responsibility toward ensuring higher standards for tenant safety, property conditions and overall service. Property management has undeniably evolved into a challenging and precarious industry, with the legal consequences of mismanagement becoming increasingly severe.

The formation of residents’ associations representing the collective interests of lessees provides a collective voice to campaign for the completion of building repair and maintenance work. Associations can hold the property manager accountable to spending on service charge items, engage in consultation regarding major works and service charges, and request assurances that any maintenance sinking fund is properly safeguarded. Although influence may appear limited, property managers are at risk of complaints being logged under the redress schemes, resulting in compensation being awarded, or a local authority, who have the right to impose fines. Residents’ associations may also appeal for the ‘right to manage’ and take over management responsibilities; this may be fraught with complications for lessees if there is historic fund mismanagement or a long-term failure to maintain a building.

It is clear from the examples given that the rapid rise of high-rise residential developments has introduced a host of challenges for insurers, property managers and leaseholders alike. As construction quality struggles to keep pace with demand, the resulting increase in water damage claims and long-term building defects underscores the vital role of proactive property management.

Now more than ever, property managers must take a proactive stance — ensuring regular maintenance, timely repairs, strategic sinking fund management and transparent communication with leaseholders. By doing so, they not only protect the buildings under their care and mitigate losses, but also safeguard the financial stability and wellbeing of the residents they serve.

The time to act is now: Prevention, preparation and strategic financial planning are key to navigating the evolving landscape of urban residential claims.

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