The use of the premises will affect both acceptance by insurers and premium / terms
Always find out the use to which each of the premises will be put. Properties on short-term lettings may be difficult to place, as will business premises with a high fire risk, in multi-tenure or in poor condition.
Do the tenants change frequently?
Management, housekeeping and close control of let premises particularly where the building is multi-tenure is always important but more so where the tenancy changes frequently. Additionally, the landlord should be notifying the change in tenancy and may have special requirements to enable them to charge out premiums to each tenant.
Are the properties unoccupied?
Policy cover for unoccupied properties may be restricted and special policy conditions applied. Full details of unoccupied properties will be needed.
Are the properties managed? If there are procedures in place to manage the properties, insurers will find the business more attractive. It is important that the landlord or a representative regularly inspects the premises.
What requirements does the lease/contract between the landlord and the tenant specify in respect of insurance? Check what needs to be insured under the lease, who needs to take out the insurance and who is responsible for paying the premiums.
Other cover required
Additional cover required, which is not chargeable to the tenant under the lease, i.e.: Property Owner’s Liability
Charge out strategy
How will premium be charged to tenants? Having established the basis, on which cover is to be provided, let us know how the premiums will be charged to tenants and the format in which you will want it shown on both policy and premium notices for this purpose. Also identify those elements of the premiums, which cannot be charged to the tenants.
Only the activities specified in the policy will be covered. Make sure that all business activities undertaken by you are identified. Do you develop land or provide service facilities such as security, a crèche etc?
Is all the property at the premises owned by you or the responsibility of you, included in the insurance? Make sure that all property is identified and valued within the cover effected. Remember to consider the contents of the common parts (entrance halls, stairways, etc.), fixtures and fittings, external walls, gates, fences, landscaping, car parks, outbuildings, yards.
Foundations should be included. Take care; the base foundations of the building may suffer severe damage, needing reconstruction. Local Authorities may require more extensive foundations during re-building. Always include an adequate sum insured for foundations.
Property owners are subject to numerous pieces of legislation for example:
Health and Safety Work Act (Section 4) – Applies to those in control of premises provided as a workplace.
Workplace Health and Safety and Welfare Regulations 1992 – Sets minimum standards for physical standards and conditions in the workplace.
Fire Precautions Workplace Regulations 1999 – Places requirements of fire risk assessments of premises used as a workplace.
N.B. there are regulations in force regarding Property Owner’s Liability for asbestos in buildings.
Public Authorities/European Union Legislation
You may well be faced with changes to your premises imposed upon you by your Local Authority or EU Legislation, which may insist that undamaged parts of the building(s) are rebuilt to meet Regulations.
Adequate provision should be made in the sum insured to cater for this eventuality. The Public Authorities and EU Clause will provide cover for damage to portions as long as the damage to the premises is caused by an insured peril and such improvements/changes have not been previously notified to the insured by the Authority. Advise the insurer if the cover is required for undamaged portions. It is important to be aware of current legislation in order to set an adequate sum insured.
Loss of investment value
In the event of extensive damage, are you likely to suffer a reduction in value to the property or have to re-build elsewhere? Establish the circumstances where this may occur and seek specific cover to meet the needs.
This cover is normally treated as an extension to standard cover. Cover is available in suitable cases.
Most insurers no longer cover an underlying limit of £100,000 for buildings, contents, business interruption and book debts respectively – Full cover can be purchased via insurers. Make sure that the cover is wide enough to cater for all your needs, paying particular attention to the business interruption extensions for public utilities and denial of access, which would cause severe loss.
Explosions of Steam Boilers
Damage to property as a result of explosion of steam boilers is not always provided by standard cover. Check if the steam boilers are on the premises and whether these are the responsibility of you, the owner.
Do you acquire/develop new properties? Capital additions provides cover for newly acquired or erected buildings and refurbishments.
Failure to insure
Is it the landlord’s responsibility to insure? If you are responsible for insurance and inadvertently fail to insure, you may still have a duty under the lease to reinstate. Consider a contingency cover in your name.
Is it the tenant’s responsibility to insure? Where the responsibility to insure lies with the tenant and they fail to do so, you may be unable to cover the rebuilding costs. Consider a contingency cover in your name.
Property Sums Insured need to be protected against the effects of inflation.
A range of provisions are available to protect you against the effects of inflation i.e. index linking, Day One, adjustable/non-adjustable, etc.
If a property is re-built, you may not be able to recover VAT on rebuilding costs or may be charged VAT on the land. Establish whether you can recover VAT and if not discuss implications with us.
Properties outside the UK
Are any of the properties outside the UK? Special provisions may apply to properties outside the UK.
Where premises are let or leased there is limited control over security. Damage following theft may be extensive.
Fees may be incurred in the event of a claim. Policy cover is available for architects’, surveyors’, managing agents’, legal and consulting engineers’ fees following a claim.
Defective Premises (Defective Premises Act 1972)
A Property Owner who disposes of premises continues to have a liability for the condition of the property even after they have sold it.
Full repairing (and insurance) lease (FRI lease)
This is a lease where the lessee is responsible for the whole cost of repairing, maintaining and insuring the property. Care should be taken to ensure cover is arranged on the correct basis.
N.B. many Public Liability claims result from inadequate maintenance.
Strict building and rebuilding controls require listed buildings to be rebuilt in a like manner. Sums insured must be adequate to cater for this increased responsibility. This particularly applies to buildings that are old and/or of specialist construction.
Loss of value following alteration of planning consent
Local authority planning regimes may alter the rebuilding of a property to the same specification. Such stipulations may affect the value of properties.
Provision of facilities
Does specific cover need to be arranged where property owner provides facilities as part of a building complex? e.g. lorry-loading bays, swimming pools for leisure facilities, escalators and lifts. This may need extra consideration terms of cover levels. This is particularly applicable to Property Owner’s Liability cover.
Ensure that all services attached to the building for which you are responsible, are identified and catered for in the cover and sum insured. e.g. damage to underground pipes, cables, wires, clearance of drains, loss of metered utilities.
Provision should be made in the rent sum insured for charges levied on the tenant by landlords for services they provide for the property. e.g. maintenance charges, insurance premium, administration charges.
It may be necessary to provide administrative support to accommodate the common practice of landlords invoicing tenants for the cost of insurance. We can assist you on this.