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The Smart Way to Manage Property Insurance, Records and On-Charges

 |  8 March 2022

Commercial properties are more than just bricks and mortar, they are lucrative business assets, assets which must always be profitable. To try and guarantee this, commercial landlords have two important goals: to maximise rental income and to safeguard against potential losses.

The first of those goals is widely written about and discussed, not least in this age of digitalisation. The second goal, however, is rarely a talking point, despite the fact that any failure to manage to safeguard efficiently can result in huge financial and repetitional losses.

There are three initial questions which commercial landlords must answer

Because of the fact that commercial property is a businesses asset, the laws and regulations that come attached reach far beyond those of residential property. Health and safety demands are more intense, and the result of non-compliance far graver. This means absolute due diligence is a must at all times as any administrative oversights may have dire consequences.

Before approaching an insurance provider, there are two key questions that commercial landlords need to know the answers to.

The first questions is, who will be taking up tenancy in the property? Will it be the landlord themselves, or will the landlord be leasing the property to other tenants?

Insurance providers often make significant distinctions between the two and consider the risks that come with the landlord being the occupant vastly different to those when letting out to third-party tenants. When first inquiring about insurance, commercial landlords must be certain to get cover for the appropriate style of occupancy.  

The second question is, what is the true value of the property? The best way to calculate the true value of a commercial property is to imagine the worst case scenario becoming a reality: if a property was completely and utterly destroyed, how much would it cost to rebuild?

Something that many don’t realise is that this value is far higher than that which a landlord may have paid to purchase a property. The true value needs to cover, for example, the full clean-up of the site in the event of destruction. How much will engineers, construction crews, lawyers and architects cost to completely replace the structure? Once all of these factors have been included, you’re left with the valuation figure that the insurance provider needs to work with.

It is worth mentioning that these numbers may change over time and that insurance cover must change to reflect this. Landlords may want to reference the construction costs index published jointly by the Royal Institute of British Architects (RIBA) and the Royal Institute of Chartered Surveyors (RICS).

The third question is, who will be accessing the property? Are all your suppliers and contractors currently and correctly insured?

With the answers to these three questions in hand, a commercial landlord must ensure that they gain all of the following insurance coverage:

Building Insurance

Building insurance protects a property from a wide variety of natural and man-made threats and risks, and while exactly which events are covered is somewhat down to the discretion of the provider, building insurance usually covers:

  • Fire and explosions and smoke damage
  • Land subsidence - some areas of land will be at a higher risk than others, greatly affecting the insurance quote.
  • Flooding – as above, some locations are at a greater risk of flooding than others.
  • Storm damage
  • Collisions/impacts – such as colliding vehicles and falling trees and branches
  • Vandalism

Property Owner’s Liability Insurance

Property owner’s liability, sometimes known as public liability, concerns the duty of care that a commercial landlord owes to the individuals who live, work, or operate within and around the property.

Landlords must take reasonable steps to ensure that members of the public suffer no injury as a direct result of interacting with any given property and, if despite all the best efforts being made, an individual does suffer harm, a landlord must be insured against the damages which may then occur.

If anybody does suffer an injury, the landlord's risk being confronted with substantial claims for compensation. Property owner’s liability insurance is in place to cover any such incident.  

Landlord’s Liability Insurance

Just as a landlord owes a duty of care to the members of the public who come into contact with their property, so too do they owe the same to tenants and leaseholders.

Landlord’s liability insurance protects against any injuries or harm suffered by tenants or caused to their belongings whilst inside the property. Without such insurance, landlords leave themselves exposed to be held liable for the negligence which causes the suffering and is ordered to pay substantial compensation.  

Employers’ Liability Insurance

If a commercial landlord hires anybody at all to help run or work within the property, it is likely that British law will require the landlord to take out a minimum of £5 million employers’ liability insurance.  This way, landlords are covered against any injuries or illnesses that come afflict an employee as a result of their work.

Unoccupied Property Insurance

Unoccupied property creates a wide variety of risks for the commercial landlord. Standing empty for long periods of time, buildings can attract unwelcome attention from vandals, squatters, fly-tippers, and criminal activity. Arson, for example, is a significant risk with roughly half of all UK arson cases occurring in an empty commercial property.

As well as unwelcome activities and criminal behaviour, empty buildings are incredibly vulnerable to small maintenance issues turning into disastrous ones. A dripping tap, for example, can start small but due to lack of attention may develop into a full-scale flood

Such is the potential for risk with an empty property that many insurance providers will say that, if a property sits empty for too long, the insurance is nullified. This limit will usually be around 45-60 days. If a landlord leaves a building unoccupied for longer than this, they will most likely need to obtain specialist unoccupied property cover.

With so much to consider, landlords are having to be smart

The most important aspect of commercial property insurance is that, once it has been obtained, it is maintained with absolute clarity and continuity; missing a policy payment deadline or renewal date, or misunderstanding the terms of the policy, can result in fines or even criminal charges.

As landlords and property managers, you must also keep track of the status of your supplier’s insurance so non-compliant contractors do not enter your property, potentially voided your property insurance and causing leasing problems.

With Re-Leased, however, all landlords need to do enter their insurance policy details once and then never have to worry about it again because Re-Leased will automatically notify you whenever your attention is required to renew a policy or confirm a payment, ensuring that no landlord ever goes without cover.

What’s more, all vital insurance policy information is securely stored and easy to find in the cloud.  Should the landlord need to make a claim, Re-Leased has everything perfectly in place to prepare for the process.  

No more hunting through stacks of paper, and no more trying to decipher the true meaning of the T&Cs. Landlords can simply click through to the insurance section of their property’s Re-Leased profile and everything they need is waiting for them.

We’ve also been sure to make it possible for landlords, when they receive a bill from their insurance provider, to automatically on-charge the cost to the tenants.

Re-Leased can now help you minimise your risk by keeping track of your supplier’s insurance status, helping you can prevent property insurance being avoided due to non-compliance and any subsequent leasing problems. This feature is in beta testing – if you are interested in helping make this feature exactly what you need, please register your interest here.

Learn more about how landlords are being smart with their commercial property portfolio ----> CLICK HERE


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