Even against the background of uncertainties about Brexit, leading estate agents Knight Frank are enthusiastic about investing in commercial property in the UK, forecasting returns of some 7% in a market with an expected turnover of a total of £55 billion.
Since any investment also needs to be accompanied by the protection of commercial property insurance, it may be helpful to look at the various types of cover that might be involved:
- commercial property insurance – just as other property insurance – recognises the different uses to which the premises may be put;
- you may be investing in the property for use by your own business or in order to lease it to tenants – the insurance recognises the essential difference in the risks to that investment;
- if you are going to be occupying the building, of course, its structure and fabric needs to be safeguarded against a wide range of risks – such as fire, explosions, flooding, escape of water, impacts, vandalism and theft – and so, too, do all the contents, plant, equipment and furnishings;
- as the owner of the property, you may also face claims from visitors, neighbours and members of the public who hold you responsible for injuries or property damage they may have suffered – property owners’ liability insurance provides indemnity against such claims (of up to £1 million, £5 million or even more);
- if you intend to lease out the property, then the critical relationship becomes that of landlord and tenant – and your commercial property insurance needs to reflect that relationship;
- while you maintain the same concern to protect the structure and fabric of the building, in the case of commercial property you lease out, your liabilities to tenants may assume a more involved and critical priority;
- the landlord liability indemnity insurance incorporated in your commercial property insurance needs to resolve the potentially complicated boundaries of responsibility for ensuring that tenants, visitors, neighbours and members of the public are reasonably protected against the risk of injury or property damage;
- whether you own the commercial property for use by your own business or it is leased to others, your commercial property insurance may also offer alternative accommodation or compensation for loss of rental income if it becomes temporarily unusable following a major insured incident;
Mixed-use commercial and residential property
- some commercial properties are for both mixed commercial and residential use;
- the most common example, of course, is the parade of shops with residential flats above;
- in these instances, your commercial property insurance needs to recognise the respective uses of different parts of the property and the separate nature of the risks that go with each;
- the cover also needs to distinguish between those parts of the property which are occupied by you as the owner and those for which you act as landlord, leasing either the commercial or residential parts – or both – to leaseholders or tenants;
Unoccupied property insurance
- finally, remember that your commercial property insurance may be severely curtailed or even lapse altogether if the premises become empty and vacant for longer than a month or so;
- to meet the unique and heightened risks associated with an empty commercial or mixed-use building, you need to consider the safeguards provided by unoccupied property insurance.
Commercial property in the UK is a buoyant and rewarding market but, just as there are many different types of property, so you may want to consult a specialist provider of commercial property insurance to ensure that you secure the appropriate type of cover – at a competitive price.