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Post Covid-19 start-up –what property owners need to consider

As property owners you will be responsible for a varied range of building types such as shopping centres, individual industrial units, industrial/business parks, office blocks, high street units etc.  The degree of direct control and responsibility you or your managing agent need to exercise will vary so it is advisable to agree between you who will be responsible for what and when.  Tenants also have a responsibility to ensure they resume their operations safely and so you should involve them in any plans.

Each premises will need to be individually risk assessed due to the differing type of property and occupation to establish specific needs.

Remember that all applicable health & safety legislation and regulations remain fully in force such as: –

  • Health & Safety at Work Act 1974
  • Management of Health & Safety at Work Regulations 1999
  • Workplace (Health, Safety & Welfare) Regulations 1992
  • Fire Safety Regulatory Reform Order

Reopening premises

Planning

Inspections and reinstating the utilities and services may be the sole responsibility of the tenant or may involve the landlord or managing agent. This process should be carefully planned to ensure the building utilities and services are brought back into operation in a controlled and safe manner. It is important to initiate and keep regular communication with all tenants and to co-ordinate responsibilities. This is especially pertinent for multi-tenanted buildings and high-rise offices, to agree a strategy and maintain social distancing in communal areas.

Consultation

As a property owner or managing agent you should consult with tenants about the return to the premises. Keep up to date with the latest government guidance to help them plan.

Tenants must consult with staff and employee representatives and consider the risks of anyone being harmed in the workplace and carry out a suitable and adequate risk assessment.

Some may be anxious about their safety when returning to the premises, and all tenants/managing agents should talk about any concerns and try to resolve them together.

Risk Management

Considerations will vary depending on the site layout, equipment and processes involved, and should have been assessed in the planning stage.

These are some things you should consider and manage:

  • Update risk assessments and working procedures in respect of the Covid-19 amendment.
  • For multi-tenanted buildings how to maintain social distancing in communal areas under your responsibility such entrances, lifts, toilets, changing/showers facilities.
  • Confirm that your employees have had training refreshed in respect of Covid-19 for risk assessments and method statements.
  • The supply and provision of PPE where this is required for work-related activities.

Document

Keep records your assessments and update to reflect any changes. Communications with your employees and tenants about what the new changes may mean, ensuring that they fully understand and above all document and record all training and information going forward. All actions, systems and procedures must be documented – you may be required to produce evidence of compliance to a regulator.

Cleaning

Consider the layout of your premises and areas you are responsible for, prior to opening for business. For those areas you are responsible for prepare a schedule of cleaning steps covering and communicate with tenants of the building.

For multi-tenanted buildings where you have responsibility for common areas this will include the “effective management” of welfare arrangements such as reception lobbies, plant rooms, elevators, changing areas, locker rooms, shower/washrooms and toilet facilities, welfare etc.

Water systems checks

Legionella checks are very important because standing water can generate Legionella bacteria growth and the generally accepted advice is that temperature control is the traditional strategy for reducing the risk of legionella in hot and cold-water systems.

  • Cold water systems should be maintained, where possible, at a temperature below 20°C.
  • Hot water should be stored at least at 60°C and distributed so that it reaches a temperature of 50°C (55°C in healthcare premises) within one minute at the outlets.

Building Inspection

The following are some of the main checks that you may need to make on general building condition and the fire & security protection:

  • perimeter security including fences, gates, doors, windows, shutters etc.
  • internally for signs of damage or deterioration
  • Fire alarm systems, access control, CCTV systems, intruder alarms, fire doors, fire extinguishers, emergency lighting/signage and emergency exits.
  • Review the alarm keyholders to ensure adequate coverage is provided and ensure the intruder and fire alarm system Alarm Receiving Centres are informed of any changes.
  • When reinstating water supplies that have been isolated check for any leaks.
  •  Where automatic fire sprinklers systems are installed, please click here for a separate detailed guidance note.

To read more on this subject click here for detailed guidance sheet “Post-coronavirus start-up guidance – Property owners” issued by AXA Insurance. 

For the UK Gov Coronavirus (COVID‑19) guidance and support website click here.

If we can help you regarding any of the issues mentioned, or if you need any further information or advice on this subject please don’t hesitate to contact us.

Unoccupied or Temporarily Closed premises

Due to the current situation many businesses have had to temporarily leave their premises unoccupied due to the Covid-19 outbreak. Some have even become permanently vacant as the occupier has gone with no intention of returning.

As a result of this we are frequently being asked: –

“What action should we be taking as the premises is temporarily closed?”

“What if the premises were previously unoccupied before the COVID-19 situation?”

“What if the unoccupancy of the premises is now permanent and not just a temporary measure?”

Most insurance companies have issued statements outlining their position and have said that they are committed to treating customers fairly and so we would expect that where businesses are making appropriate provisions to mitigate their unoccupied risk as a result of Coronavirus, the temporary closure of the building should not prejudice any claim made.

The specific details and requirements relating to unoccupancy conditions do vary between insurance companies, so the following is intended only as a general guide and if you want to know what applies to your policy and any particular insurer then please get in touch with your usual contact at Arlington.

“What action should we be taking as the premises is temporarily closed?”

Insurers have said that full cover will be maintained for a period. Some for 45 days, others for 60 and one without a specific period.  All insurers do expect the Insured (or whoever is responsible) to take the appropriate actions and provisions (in compliance with existing government guidance and social distancing requirements) to mitigate the risk and have issued guidance as to what they expect.

In summary this consists of but is not limited to: –

Waste: Remove all external waste, pallets and empty skips ahead of closing.

Waste bins: Empty all waste bins and relocate to a secure area, ideally at least 10 metres from the building. If this is not possible and bins and skips are within 10m, these should have lockable lids.

Fire Systems: Ensure that any fire and/or sprinkler systems are fully operational

Fire Doors: Carry out a check to ensure that internal fire doors are closed

Building Utilities: Shutdown any non-essential electrical devices and building utilities

Inspections: Arrange for a weekly inspection of the building both internally and externally.

Physical Security: Carry out a check to ensure physical security measures are in place e.g. fences are in good repair, windows are locked, shutters are in place, gates are locked.

Intruder Alarm: Make sure your intruder alarm is set and that the remote signalling is in place. Ensure sufficient numbers of keyholders are available to respond to an alarm activation within 20 minutes.

Maintenance: essential maintenance should continue with any remedial measures completed. Premises that have Building Management Systems (BMS) with remote alerts should continue to be responded to.

Hot Works: No Hot Works should currently be permitted.            

“What if the premises were previously unoccupied before the COVID-19 situation?”

Where a premises was previously unoccupied, then the specific requirements and cover, that was agreed with your insurer will continue to apply, although as with the above, they recognise the challenges and require that these are complied with as closely as is permitted during this time. In the event of specific concerns or difficulties regarding compliance, then please notify us so that the issues can be considered by Insurers.

Please also notify us as soon as practicable of any circumstances where existing security provisions (e.g. manned guarding) that were stipulated by insurers are downgraded or removed due to changes in government guidance and / or the ability of clients or their suppliers to maintain support.

“What if the unoccupancy of the premises is now permanent and not just a temporary measure?”

When a premise that was previously occupied has now become permanently unoccupied, whether due the Coronavirus or not, you need to let us know this. We will then notify your insurer and arrange cover and advise them of the risk management actions that you have or intend to put in place to protect the premises.

Commercial insurance premiums are increasing

What’s driving these increases?

Insurers companies have been losing money

For more than a decade there have been rate reductions but with increased cover and limits. This has been driven by the excess capacity in the insurance market and has meant that insurers have been unable to make the return on capital that they require as the industry is paying out more in losses and expenses than it is collecting in premium.

The increased cost of doing business

Insurance companies face the same variations in their running costs as any other business, including their customers. For example, exchange rate fluctuations, salary inflation and energy cost rises.

Less interest from investors

When the insurance market seems a less attractive proposition for investors, they withdraw. This means there are fewer insurance companies in business, leaving customers with less choice and allowing the insurers that are left to be selective about who they insure and how much they charge.

Poor investment returns

Insurance companies rely both on the premiums they charge and on income from their investments to stay in business. When premiums are low, insurers supplement any shortfall in income using their investments. The current economic climate has resulted in poor investment returns and insurers have been unable to rely on them to offset the low premiums: prices are therefore driven up.

Increased reinsurance costs

The reinsurance market is another factor that drives insurance pricing strategy and consequently as reinsurers significantly increase their costs then insurers react by increasing the primary premium.

Higher claims costs

Many insurers are currently operating at a loss due to higher than expected claims costs which are driving insurance prices higher and have these losses have been caused by: –

  • Natural disasters such as the recent flooding and severe weather events
  • Emerging technologies, such as modern methods of construction, smart features, artificial intelligence and robotics which have created new insurance risks whilst also increasing repair or rebuild costs following a claim
  • Higher legal costs for general liability, errors and omissions, directors and officers and employment practices liability insurance

When some of or all these factors are present then the insurance industry enters into what is commonly referred to as a “hard market” and you can then expect to see

Increased premiums

There will be premium increases on all types of insurance irrespective of whether there have been claims or not; but as you might expect the level of increase will be higher where the loss ratio is poor or where there are adverse risk features.

A reduction in capacity

During a hard market, insurers often start restricting the amount of capacity they’re willing provide and will look to remove non-core or poorly performing risks. Cover and limits may be reduced or even withdrawn completely.

More focus on risk selection and management

Insurers are asking for more information on the risk detail and loss prevention measures. They are being far more particular in their risk selection process and some risks will now only be deemed acceptable with improvements to the risk management.

It will take longer to transact business

Expect slower response times from insurers as they have an increased workload because they are re-underwriting their business and also because more insureds are looking for alternative quotes in the hope they can find better alternative premiums.

If we can help you regarding any of the issues mentioned, or if you need any further information or advice on this subject please don’t hesitate to contact us.

Be prepared – winter is coming

One weather company has predicted the coldest winter in 50 years, but the Met Office are saying their long-range predictions look very different. Of course, winter weather is notoriously hard to predict so as usual, no one is sure what the future holds.

What we do know for sure is that winter can bring a set of property hazards, which from an insurance perspective, is always good to be aware of in advance. So, here are some winter risk management tips to keep the property claims away this year.

 Be prepared

  • Ensure you know the layout and routes of all water, gas and electricity services within the premises and that this information is recorded and available
  • Know the location of all main and subsidiary isolation-valves and ensure they are fully operational – regular exercising of the valves will ensure easier isolation
  • Research the details of reliable local plumbing contractors and keep their contact details available

Prevent burst pipes (before anything happens)

  • Protect pipes and tanks with good quality lagging to BS6700
  • Repair dripping taps & faulty ball valves as they can cause waste pipes to freeze
  • For unoccupied buildings or those with a history of freezing incidents, leave the heating set at a low level, or drain all equipment that is susceptible to condensation or freezing
  • Install a frost stat set at a minimum of 4ᵒC to central heating and check it is working correctly
  • Arrange for the premises to be inspected at least daily in periods of very cold weather
  • Service heating systems at least annually
  • Ensure all boilers are safeguarded against freezing – particularly drain and condensate lines. Drain down all idle boilers

Minimise damage (should anything happen)

  • Isolate water at stop cock. Turn on cold taps to drain the system as quickly as possible.
  • Turn off the central heating
  • Protect or remove any vulnerable contents or equipment that may be damaged.
  • Never use naked flames to thaw ice plugged pipes and equipment
  • ‘Ice dams’ can be created on the edges of roofs, especially tiled roofs by the continual thawing and refreezing of melting snow. Water may ‘back up’ up the roof getting under the tiles and leaking into the building. To help prevent this keep drains open and free of ice in a safe manner. Engage specialist companies to perform this if necessary
  • Monitor the amount of snow on roofs and arrange for it to be cleared before accumulations reach unsafe levels

Sprinkler systems

  • For all sprinkler systems engage sprinkler contractors to make systems ‘winter safe’
  • Especially vulnerable are systems protecting outdoor areas or cold areas (attics etc), valve chambers, and pump rooms
  • Heating should always be maintained at or above 4 degrees C. Exposed pipe work should be trace heated and lagged, and this must be routinely inspected and maintained

If you need any further information or advice on this subject don’t hesitate to contact us.

UK commercial property values fall

Commercial property values dropped in September but that doesn’t affect the rebuilding cost of a property.

You may have seen recently in the press that according to the latest CBRE Monthly Index capital values across UK commercial property fell -0.4% in September 2019, and rental values and total returns were flat. 

Any correction in real estate prices caused by poor performance and the sluggish nature of the economy shouldn’t lead you to believe that your property building reinstatement cost is unlikely to have gone up.

In the third quarter of 2019, UK commercial property capital values decreased -0.9% overall, the fourth successive negative quarter and the weakest of 2019 so far. 

For example currently Index-linking is hovering between 2.5% – 4.5% in both the residential and commercial sectors.

A building’s market value is not relevant for insurance purposes and its use for building sum insured is a frequent source of underinsurance.

What is underinsurance
Property insurance policy wordings typically include a ‘condition of average’ clause. When underinsurance is present, this condition enables claims settlements to still be made under the policy but reduced in proportion to the level of underinsurance.
e.g. if a policyholder undervalues their total buildings value by 50%, and therefore only pays 50% of the premium that should have been due, they can only expect to receive 50% of a buildings claim’s total value.

It is estimated that around 80% of commercial properties could be underinsured!

What to consider when setting the value
The amount of money it will cost to rebuild, or reinstate, a property depends on such factors as its construction, style, quality, condition and location, as well as considerations such as building regulations and the cost of labour. In some parts of the country, and with certain types of property it can be that the market value is only a very small percentage of a building’s rebuild cost.
Buildings sums insured need to reflect the full cost of reinstating a building following a total loss. In addition to materials and labour, this includes all associated costs such as demolition, debris removal, planning and professional fees.
Each building will have features that can significantly alter a reinstatement cost, such as difficult site access, period features or specialist construction techniques.

Many property owners’ policies will not apply an average clause if professional valuations are undertaken at least every three years by a RICS qualified surveyor.

A qualified surveyor will have the expertise to identify and quantify these factors, and one should always be engaged when establishing sums insured for insurance purposes.

The benefits of having an up-to-date valuation

  • Ensures your Buildings Sum Insured is adequate.
  • Significantly reduces the risk of an underinsurance provision being applied to reduce the amount payable in the event of a claim.
  • Enables the insurer or the loss adjuster to immediately focus on the claim rather than any underinsurance issue which might delay the repair process and lead to potential unrecoverable increased costs.
  • Provides good corporate governance for any commercial business, helping to protect the rights of directors, employees and shareholders in the event of any insured major disaster.
  • Allows buildings of historic or environmental value to be restored without being lost to the wider community due to a lack of funds.
  • Provides peace of mind to all parties of the insurance contract.

If you need more information about obtaining a RICS valuation or want to know how Arlington Insurance Services can help you with this our contact details can be found here.