The Permitted Development Rights Scheme, introduced in May 2013, allowed developers to convert tired and unused offices to residential accommodation without having to apply for planning permission. The intention being that this would create much needed housing and allow developers to quickly achieve this. In October 2015, the government announced it would make office-to-residential permitted development rights permanent, and added new rights to enable the change of use of light industrial buildings and launderettes to new homes.
by Colin Donnellon, Development Director Clear MPW Insurance Brokers
Fast forward and today we are seeing a considerable number of commercial properties converted to residential apartments. This trend is likely to continue, as many commercial properties are likely to remain unused following the dramatic affect of the pandemic lockdown.
Insurance implications
Insuring commercial to residential property conversions can involve the various parties to the project insuring individual components of the risk.
However a single project insurance program is an increasingly popular risk management technique being used by property owners, developers and contractors for construction projects. This type of program can reduce total construction costs whilst controlling the scope of risks to be insured.
A single project insurance will combine insurance coverage for a project into one program negotiated, purchased and managed by a single sponsor. That sponsor can be either the owner or developer (owner-developer controlled insurance program) or the contractor (contractor controlled insurance program). Importantly a single project insurance should be able to include all key insurance cover for the works including public liability, excess liability, 6.5.1 type non-negligence, existing structures buildings, advanced loss of rent/ additional cost of interest business interruption cover, professional indemnity, environmental impairment and buildings defects.
A specialist construction insurance broker would be able review your building contract provisions to ensure the correct Joint Contracts Tribunal (JCT) provisions are put in place to protect your assets and upcoming works. A broker can also ensure that any provisions can be fulfilled to avoid a breach of contract. Depending on the complexity of the construction works programme, there may be various types of insurance cover required throughout, and at different phases of the building project.
Broker top tips
●Getting the balance right is key. Insurance will provide remedies, but it is important to understand the policy’s strengths and limitations. Complex situations call for a deep understanding of the risks and this is a critical task of the broker.
●It is vital to work with brokers who have specialist teams focused on the property sector.
●The broker should work with the client during the fact-finding process so that all relevant information is presented to the underwriters.
●Some brokers have in-house claims team that will be able to provide guidance if there is a claim and it is worth seeking out this service.
