You have a commercial building and you want to rent it out and then take some commercial insurance. You are not sure what planning use you wish to use as the council said that you could have various different trades in the property.
Yes, it will definitely affect your insurance. Every occupant type will thus relate to the premium that’s involved.
what type of building is it, is it brick, wooden, specially constructed for the type of occupant that you may have?
The occupant will make a huge difference to the rate. For instance if you were in a restaurant going into the business it is a much higher rate than if it was an office block.
If you are going to rent the premises out then you would need to ensure that you have a clause for loss of rent.
Loss of rent itself could be anything from one years through to three years and you thus need to ensure that you insure the correct amount for the property. You never know if it burns to the floor how long it will take to put the property back.
This could improve your rating in relation to the property. The rating might actually come down if there was a residential above but then again it all relates to the commercial element and exactly what is being put to the property.
Commercial property or commercial landlord insurance is protection from property owners who are letting out to a third party for commercial use. If your tenant is going to be a business organization or group and there is going to be a lease in place where they will rent the property then you will need commercial insurance.
There are differences with tenants. These are known as more domestic than they are commercial. A commercial tenant may be using industrial equipment, have 100s of employees, deal with hazardous waste or using commercial deep fat fryers for their property. A commercial insurance product will look at the users of the building and adjust the cover to match the risks of the occupants in the building. It is so important when you take your commercial property that you understand the type of tenant you are going to have and what they are going to do.
The criteria in relation to office blocks are slightly more relaxed and the rates are normally substantially lower. The insurance companies treat these as a much lower risk. They will look into company status, the date the business was established. The number of full time employees, the estimated wage roll for all employees, the annual turnover. Also they will look into the business description i.e. are they solely using it as an office. They will look at the building itself and whether it has self-contained elements and a means of escape. They will look at how the property is occupied as well as any physical security measures that have been put in place as well as any health and safety.
Commercial property this is the most misunderstood and overlooked for commercial landlords. This is liability insurance for commercial property to compensate a third party in respect of property damage and injury through negligence. If for instance something fell off your building you are liable and not your tenants. But this is ultimately the landlord’s responsibility to oversee their property and make sure that it is adequately maintained.
For instance if a third party delivery person takes a fall after tripping on a loose step in the entrance of your building you could be held liable in a compensation case.
There are various limits to liability but these can be anything from £1M to £10M for commercial properties.
This can be one of the most important parts of the commercial insurance. It deals with the cover of costs for repairing damage to rebuilding the property. You must insure for the full cost of rebuilding the property should it be destroyed. Please see previous articles on rebuild cost. Being under insured could be catastrophic for you. If you under insure the building the insurance company may not pay out for you to rebuild the property so getting this right is absolutely critical.
You will find that most insurers have an average clause. This means that the sum insured for the building which is not enough can reduce the claim by the percentage that you have under insured. For example you insure the building for £100,000.00 but it should be £200,000.00 and you are claiming £50,000.00 you could end up only being able to claim for £25,000.00 i.e. minus the 50% that you have under insured.
It is therefore critical that you look at this.
If your property should become uninhabitable for a period of time the insurance company will pay out for the rent that you are subsequently unable to collect meaning that you are not losing out financially.
This could be anything between one to three years and is commonly available. It needs to be a serious consideration as you need to understand what is adequate for your building. You have to look at the worst case scenario to include demolition, debris removal, architects, and finally rebuilding which can take a long period of time and sometimes even years.
The contents of your building can be difficult to understand. In real terms if you turn your building upside down anything that is unattached would be classed as contents. This could mean things such as tables and chairs but not doors, cupboards and walls which will come under the building insurance. Contents insurance can be a vital part of your protection.
This isn’t always offered as standard. You must make it clear that you want to be covered for this before you request the policy. Accidental damage is considered damage to your property that is not classed under an insurable peril such as a burst pipe when nailing into a wall.
This will help with your legal expenses when taking somebody to court for all such items. Legal cover again is not a standard part of the policy but can be requested as an optional extra.
Again not necessarily a standard clause within the policy. This is because tenants are normally considered to be on your property with your consent. If there was an incident where they were expressly causing malicious damage with intent this option would cover you for the costs.
Commercial properties that are empty are problematical when it comes to insurance. You need to understand that the risk is extremely high for an insurance company and they may not always give insurance.
This is relevant to the insurance company as they will want to know what is going on to fill the property and to occupy it. Is it a long term vacancy or is it just short term where you are in between tenants. It is critical that the insurance company know that you have a plan for the property.
If you don’t have a plan for the property or schedule of works, have it on the market and/or a programme to bring it into occupied use or a change of use then the insurance company will ask you to put this in place.
This could affect the price of the insurance quite dramatically if you are thinking of selling it rather than letting it.
The insurance company will see whether it is on the market and whether you are actively doing something about trying to re-let the property.
The insurance company will want to know whether works are taking place in relation to the property.
The insurance company will want to know what works are taking place, how long they are going to take place and how much they are going to cost and who is going to fund it. What is the purpose of the works and what is the long term strategy in relation to the property.
Hot works normally refer to flat roofs, and work with bitumen this can be high risk and as such the insurance premium could be substantially more.
Is there a jct in place- a jct is a contract that facilitates the process of delivering a building project. In simple terms they set out the responsibilities for all parties within the process and their obligations to each other. In this way it is then clear what work needs to be done and who is doing it, when they are doing it and for how much. They are critical within a building construction business.
The insurance company will want to know if the propertys unoccupied that it is regularly inspected.
You are no doubt aware that it is illegal for squatters to occupy residential property but when it comes to commercial it is not the case. It is thus important that the property is either boarded up and all doors made secure or bricked up. This would be critical. The insurance company may need full time security on site as well.
If you are considering any form of commercial insurance then why not contact us and discuss it with us and what your requirements are. Every policy for commercial property is different.
Please read our article following on from this for more information, click here.
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