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Businesses Advised to Check Leases and Insurance Policies- 08/01/2010
The recent explosion in Shrewsbury town centre has shocked the entire community, but what would be the implications and costs for local business owners and occupiers should it happen to them?
According to David Lucas, an associate in the commercial property department of Shropshire law firm FBC Manby Bowdler LLP, landlords and business owners need to check their insurance policies and business tenants need to check the terms of their lease.
“Owner occupiers and landlords should have insurance in place which will allow a claim to be made for the costs of reinstating a damaged building,” says Mr Lucas, who is based in FBC Manby Bowdler’s Shrewsbury office. “If they do not, they need to act now or potentially face a large bill for rebuilding costs.
“For most business tenants with a standard lease, if the property they occupy is suddenly damaged or destroyed, they will no longer have to pay rent, provided they are paying the landlord’s insurance costs which covers him for lost rent while the premises cannot be occupied.
“Once the premises have been repaired, usually paid for by the landlord’s insurance, the tenant has to return to the premises on the same lease terms as before the interruption to the business.
“Unfortunately while the tenant is waiting for the premises to be repaired, it will generally have to relocate, at its own cost, or simply stop trading in the meantime.”
Mr Lucas continues: “One area of particular concern in modern leases is what happens when a property is damaged by a risk which has not been insured against, such as terrorism.
“Fortunately there are usually sensible ways of covering both parties to ensure that neither faces an unacceptable end result in the unlikely event of this happening.
“The key for both landlords and tenants, as in all aspects of commercial property, is to ensure that they are properly and fully advised when negotiating a new lease, so that should a terrible event such as the Shrewsbury explosion occur, everyone affected at least has certainty as to where they stand.”