Connect to Real Estate

One of the worrying issues that emerged during my time as president of the City Property Association was just how segmented the property market is in the City. The top-quality, well-let offices and retail buildings are commanding increasing rents and higher market values: a subject of considerable rejoicing. However, there is also a substantial amount of far less desirable buildings that fall short of current requirements for carbon emissions and other green demands of prospective tenants.

There is little chance such properties will be let without substantial refurbishment and adaptation.

This leads me to an insurance problem causing concern in property and legal circles: when a contract involves an extension or alteration to an existing underproperty, the standard Joint Contracts Tribunal contract -- in schedule 3, option C in the 2005 version, and its equivalent in other forms. This requires the employer to arrange joint names insurance against specified perils for the structure and contents, which are the responsibility of the employer. The clause also requires the employer to arrange all risks cover for the works.

This is not likely to pose a problem when the client is the owner of the property and arranges the building insurance.

However, when dealing with a property actually insured by a third party, an approach has to be made to that party at an early stage. It is important to assess their attitude towards providing some protection to the contractor, and the tenant, in respect of damage done to the existing structure, because of the negligence of the contractor or others under the control of the client. In those cases, it is highly unlikely that cover will be provided

Find out more in my full Property Week article here

As an insurance broker of considerable vintage I am fairly immune to allegations that all I am trying to do is to sell more insurance, when introducing new risk exposures or coverage concepts. Rarely is it admitted that my intentions are honourable - even if they are aimed at protecting my client.

On this occasion, I am actually counselling property owners to consider reducing their insurance costs by looking seriously at the building reinstatement values - an important element in the formula by which premiums are calculated. This advice is not based on some attempt to make myself loved, alas, but rather following discussions with several major firms of valuers, backed by data produced by the RICS.

In essence, the cost of building has fallen quite substantially over the past few years and few policy holders have taken advantage of that by reducing sums insured commensurately. The inevitable outcome is that too much premium is being paid. For more background, see the most recent column in Property Week.

This is an appropriate moment to mention the difference between investment values - which, sadly, have also fallen during the same period - and reinstatement values. Many property owners still mistakenly insure for the latter but the policy is designed to meet the costs of reinstatement of the building, usually together with cover for loss of rent, following damage. It is well worth checking that the right figure is being used to avoid any complications if a claim occurs.

As you may know, I joined the real estate team here in July - the pinnacle of my career spanning some 45 years focussing on commercial property insurance. During that time, as well as being Chairman of the Insurance Committee of the British Property Federation, I have been honoured to be elected as President of the City Property Association - a post that I have held since March 2008.

It was in this role that I became engaged with the consultation concerning the Mayor's proposals to amend the LVMF put in place by his predecessor some two years ago. This complex guidance to planning authorities sets out the restrictions that will apply to any new development to prevent it encroaching on the views of certain strategic buildings - primarily the Tower of London, The Palace of Westminster and St. Paul's Cathedral.

I wanted to bring your attention to an article published in the latest edition of Property Week by Bill Gloyn, Partner, Jardine Lloyd Thompson Real Estate and President of the City Property Association.

I read with some interest his thoughts on the revised ideas for the London Views Management Framework coming out from the London Mayor's office. This forms part of the consultation on the new draft London Plan. The framework basically governs what can be built in and around certain heritage buildings of international importance - in particular, St. Paul's Cathedral, the Houses of Parliament and the Tower of London.

Following on from the recent Judgment handed down in the Employers Liability "Trigger" Litigation we attach our Technical & Legal Bulletin .

The bulletin explains the ruling by Mr Justice Burtons ruling, maintaining the status quo that insurers are on risk at the time of exposure to asbestos fibres and are
liable to provide an indemnity to their insured even though mesothelioma does not develop until a number of years later.

Property companies must show a focus on risk management to avoid increased insurance premiums

Some real estate investors have good insurance claims records because they manage their risks; others have just been lucky. But when insurance policies come up for renewal in the current climate, underwriters are going to ask - was it good luck or strategy? Without evidence to the contrary, they're going to assume it was luck.