Being a Commercial Landlord (or their property managers) can be a difficult balancing act. On one hand the tenant is entitled to ‘Quiet Enjoyment’: meaning that the landlord must not interfere (or allow anyone else to interfere) with the tenant’s enjoyment of the property.

But on the other hand Commercial Landlords (along with their Property Managers) can be held accountable for lax health & safety and poor building maintenance. Depending on the type of property and lease, you may be responsible for:

  • Fire safety.
  • Maintenance and repairs.
  • Asbestos Survey along with monitoring and maintenance.
  • Fixed Gas and Electrics – inspection and certification.
  • Refrigeration, air conditioning and heating systems.

In some cases these responsibilities can be transferred to the tenants in the terms and conditions of their lease. The use of Full Repairing Lease generally makes the tenants responsible for the costs of repairs and maintenance leaving the premises in the same condition as when they signed their lease.

However it is important to remember that the Property is still an asset of the Commercial Landlord and checks need to be undertaken ensure the Tenant is keeping up with the maintenance otherwise there maybe a large expense at the end with a dispute over when, how and if the tenant can pay.

Risk Assessment & Management

For most commercial premises the services of a professional property manager are essential and can help. The start of any lease should incorporate a risk assessment (preferably reviewed annually) for each property. This should pay particular attention to: –

  • Tenant Use & Processes: Find out what processes the tenant undertakes – especially if there are any hazard chemicals or processes involved.
  • Fire Safety: To take into account the building construction and use of the building. Ensuring that all control measures are in good, working condition and who’s responsible for them. This may include: –
      • Non Standard Construction: Timber framed buildings or use of ‘Composite Panels or Linings’.
      • Heating: Ensuring fixed systems especially gas appliances are inspected and maintained. Avoiding the use any form of Portable Heating especially anything than can be a source of ignition.
      • Fixed Electrical Installation: For most commercial premises an Electrical Installation Condition Report should be produced at least every 5 years. However, there should be regular routine inspections conducted at least annually.
      • Hazardous Chemicals: Ensuring appropriate storage and cabinets are used.
  • Flood Risks: Always check and register with the Flood Warning Helpline.
  • Water Systems: Is there a need for specialist contractors to conduct annual legionella bacteria risk assessment for all of the property’s hot and cold water systems.

This Risk Assessment will then help with the usual and on-going property management – which needs to also take into consideration: –

  1. Property Repairs & Maintenance – Competent and Professional Contractors: Checks should always be undertaken that any contractors are competent to undertake works, ideally providing their own risk assessment/method statement. It is essential they have adequate Public and Employers Liability Insurance in place before they begin any work. Check the small print as some contractors may only be insured to work on private dwelling houses, shops and offices!
  2. Assignment and subletting/Alterations and changes of use: It is important that this only happens with your prior approval and consent – as that risk assessment will need to be reviewed.

Having a plan in place to monitor your properties helps to manage and reduce the risk.


From a Commercial Insurance perspective the introduction of The Insurance Act 2015 requires the policyholder (including their property managers) to make a ‘Fair Presentation of Risk” of material facts at the inception and each renewal of the policy (see here for more information). Ignorance of the risks and facts is no longer an acceptable excuse which will cause problems in the event of a claim. 

Some of the typical issues encountered are: –

  • Modern Methods of Construction (MMC): It is no longer sufficient to describe a building as “Standard Construction”. Over the last 30 years new building techniques have been introduced which affect the Fire Safety of buildings, such as: –
      • Insulation in cladding and linings: The recent Grenfell Disaster and the on-going enquiry have highlighted the problems of insulation materials in cladding and linings. Some are better than others such as LPS 1181 Approved such as King Span, Mineral Wool etc.
      • Timber Framed: Particularly popular for residential buildings, timber frames are quicker to put up and more sustainable. However, Insurers rate them higher for both Fire and Escape of Water risks.
      • Modular/Panelised: This is where panels or even three-dimensional ‘pods’ are built in controlled factory settings and then transported to site. Modules could be individual rooms, or pretty much a whole house. Generally they have a steel or timber frames and/or insulation!
  • Unoccupied and Empty units: These buildings may fall into disrepair, attract unwelcome visitors, wildlife, or be targeted by vandals and arsonists. Cover is often restricted and cause insurance premiums to skyrocket. An updated risk assessment is essential.
  • Flood Risk: Another key property issue is flooding (either by rivers or surface drainage problems) can be devastating for commercial premises. The Government’s Flood Re scheme is only available to offer flood insurance for homeowners at higher risk.
  • Under-Insurance: This can be a major problem in the event of a claim – if you have only insured for 50% of the correct value you only get 50% of a claim. According to research carried out recently by the Building Cost Information Service, part of the Royal Institution of Chartered Surveyors, 80% of commercial properties in England and Wales maybe underinsured. Insurance should be arranged based upon the actual reinstatement cost to rebuild – not the sale or purchase price. We recommend that a professional reinstatement valuation is obtained at least once every 3 years – for further advice Buildings Underinsurance.

In addition for Commercial Landlords Insurance in recent years all Insurers have been changing their standard policy wordings, policy conditions and requirements in attempt to manage their risks which also makes it easier for them to deny claims. Examples of these include: –

Change of Risk. This requires that you must advise your insurers of any changes which increase the risk of damage such as change of tenants, empty properties, security measures, heating, building works and alterations etc. Failure to do so can invalidate the policy.

Fire Protection Equipment: This details the measures you must take in respect of fire protection at your insured properties.

Electrical Circuits: This requires that the fixed electrical inspection is inspected (and any defects rectified) at least once every 5 years, if this is not solely the responsibility of the tenant/lessee under contract.

Illegal cultivation of drugs cover. This extension in cover applies for any damage caused from such use of the premises. However, a condition is that you or your property managers must ensure that inspections are undertaken every 3 months and logs are kept for inspection.

Flat roof condition. Any flat portions of the roof of the buildings are to be inspected once every two years by a competent roofing contractor and any recommendations implemented.

Renovation or Repair Requirement. This requires you must declare any renovation/building works being undertaken on the property in excess of £100,000.

In summary it is important that you know the risks of Commercial Properties, these are managed and communicated to your Insurers to ensure that should a loss arise that there is correct and adequate insurance in place. Check your policy documents carefully to ensure you can comply – don’t ignore it.

Finally, Insurers have been competing with one another over a number of years to acquire business often writing for volume rather than profit. However, for the first time in a generation we are entering a period where demand for insurance exceeds supply. All Insurers are now starting to look at their books of business – a well managed risk is more important than ever to ensure your premiums remain competitive for the benefit of you and your tenants.

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