Two years after the Spectrum Building in Dagenham burned down, more than 80 displaced leaseholders are still waiting to be compensated. The building was demolished in December 2024. Insurance proceeds exist but remain frozen inside a freeholder insolvency, and the legal process to release them is still working through the courts.
The case, reported by the BBC, shows how leasehold building insurance can fail in practice when the freeholder goes into administration. Buildings insurance in a leasehold block is held by the freeholder, not the individual flat owners. When the Spectrum Building's freeholder, Arinium Ltd, went into administration, the insurance proceeds passed to administrators FRP rather than flowing directly to residents. Leaseholders have no contractual relationship with the insurer. They are creditors of the insolvent estate, and their claims are processed through the administration, rather than through the policy.
A government grant adds a further layer. The government had provided almost £6 million through its Building Safety Fund to remediate the building, administered by the Greater London Authority (GLA). The grant included a clause requiring repayment if remediation was not completed. The GLA has notified FRP that it may be owed money as part of the insolvency process. The government says this is a standard procedural step, and that the GLA would only receive funds remaining after residents had been fully compensated.
That legal step means distributions cannot be made until the process is resolved.
The structural problem the Spectrum case exposes goes beyond the specific facts of the fire. When a freeholder holds a block insurance policy and subsequently becomes insolvent, leaseholders have no direct claim on the insurance proceeds. Their access to compensation depends entirely on how the administration is conducted and whether the policy sum insured is sufficient to cover all losses. If the sum insured falls short, leaseholders bear the shortfall.
Sarah Williams, a Spectrum leaseholder, told the BBC she has been paying a £750 monthly mortgage on a home that no longer exists. Williams blamed the freeholder for underinsuring the building. "Building insurance becomes absolutely useless because there wasn't enough to rebuild the building," she said, adding there are "no checks and balances to make sure what happened at Spectrum doesn't happen again."
That concern is consistent with broader market data. Aviva's 2026 Broker Barometer found two-thirds of UK commercial properties are underinsured, with the average gap between sums insured and estimated rebuild costs standing at 79%. The Building Cost Information Service, meanwhile, put UK house rebuild cost growth at 3.8% in the year to December 2025. Policies not reviewed annually are already carrying a material shortfall before any claim arises.
Steve Dudeney, director of fire safety consultancy Ignis Fire and Resilience Ltd and a former London Fire Brigade commander, told the BBC that insurance money should be paid to those owed it and called the unresolved situation "a massive problem." On the wider cladding picture, he said the landscape was "as confusing as it was post-Grenfell."
Administrators FRP said they are now applying to the court to approve the first round of payments to leaseholders and creditors. FRP described the case as one requiring "independent legal expertise and bespoke valuation models." The Ministry of Housing, Communities and Local Government said it was urging administrators to resolve insurance settlements "quickly."
For brokers placing block-of-flats cover, the Spectrum case illustrates a risk present on any leasehold building where the freeholder holds the block policy. If that freeholder's financial position deteriorates, leaseholders have no guaranteed direct route to insurance proceeds. Brokers should check how the block policy is held and whether the sum insured matches current reinstatement values. Leaseholders have rights to challenge coverage arrangements under FCA rules that took effect in December 2023.
