Many of you will have seen and read about the terrible events in London, England at Grenfell Tower. To remind you, this was a substantial apartment block which had a catastrophic fire, apparently caused by a faulty fridge and the fire was exasperated by highly flammable exterior cladding. Aside from the complete devastation of the building itself, so far, 80 lives have been lost and sadly, more are likely to be added to the number over the coming weeks and months.
So, why are we writing this article and what effect does it have on me, if I am a landlord? Whether you are a commercial landlord owning apartment blocks, offices, shopping malls, etc., or a property investor who has several houses that you let out…your assets and legal responsibilities are immense and it is essential that you ask your insurance adviser to consider the implications on your behalf.
Of course, the physical loss or damage to your property is a simple, straightforward insurance policy that you need to consider, but before we look at the insurance angle, as a landlord, you need to consider what you can do to prevent losses. When was the last time you checked the electrical wiring? Are ‘No Smoking’ signs in place and has all fire protection equipment been maintained? If you have smoke detectors or an automatic fire alarm system, when was the last time the batteries were changed or the system serviced? As the landlord, all these are your responsibility and failing to adhere to these checks could have consequences.
Now to the insurance policy. A Fire policy is what is required, but you must ensure it is exactly what you require. Check that your sum insured is adequate to rebuild your property and don’t forget to include inflation, architects and surveyor’s fees and the cost of removal in your value. If you generate any rental income, ensure you have loss of rent cover and for as long as you believe it will take you to rebuild the property.
You have now protected your valuable asset, so what next? Well, this is where the local market here seems to have a ‘block’ on what landlords’ responsibilities are and at JW Seagon, we have been trying to convince the market that there are far greater consequences to owning and letting out a property.
Let us go back to Grenfell Towers again. Firstly, we now have hundreds of homeless tenants, many have lost everything they own. More so, the loss of lives and the knock-on effect that has had and will have. At the moment, we have 80 grieving families and there will be more, we have mental anguish and effect on other people…fire service staff, hospitals, neighbours…the list goes on. There will be untold amounts of claims from third parties as a result of this disaster and we are led to believe that the claims could rise to around £160m. The question is…’who picks up that tab?’ Well the answer is, normally the Insurer of the property who will have a Property Owners Liability extension to their policy, but in this case, we understand they only have a limit of £50m, so the issue is, once that money has gone, who pays?
Will it be out of the landlord’s own funds? Will it be the local Council who should have made sure the cladding was removed, or the building contractor who installed the cladding? Perhaps the original architect and there is even talk that Hotpoint, the fridge manufacturer may be held responsible. Someone will end up paying and, if you are a landlord, you really do need to think long and hard about the levels of cover.
Aside from considering an adequate Liability limit, as a landlord, you need to consider your personal responsibilities and liabilities, particularly if you are a Limited entity or Partnership. On Grenfell Tower, not only are the owners being held responsible for the losses, there is also talk that they will face prosecution on a personal level and even manslaughter charges. These charges, the costs and any potential fine, are also insurable but most landlords have not considered this.
We will keep you informed of developments on this case, but in the meantime, if you have any concerns, please do not hesitate to call your usual contact at JWS for advice and a solution to any concerns you may have.