Commercial-to-residential property conversions are becoming increasingly common, and with the permitted development scheme now in place, this is likely to accelerate further, particularly as many of these properties tend to have good access to amenities and transport.
Developers should therefore be alert to potential insurance loopholes when involved with any commercial-to-residential conversion. These projects can involve the various parties to the project insuring individual components of the risk.
However, single-project insurance programmes are an increasingly popular risk-management technique used by developers to reduce total construction costs while controlling the scope of risks to be insured.
This type of policy will combine insurance coverage for a project into one programme, negotiated, purchased and managed by a single sponsor. That sponsor can be either the owner or developer (owner-/developer-controlled insurance programme) or the contractor (contractor-controlled insurance programme).
Insurers should be kept fully informed about commercial-to-residential conversions to ensure policies provide the relevant cover between the period of unoccupancy and before the commencement of works. Failure to do so could not only mean the property itself is not insured, but also that there is no contract-works or third-party liability cover either. Specialist policies, therefore, may need to be taken out to cover these exposures.
In multi-tenure properties, where tenants’ contracts may cease at different times and occupancy of the property can vary, changes will need to be notified to insurers (and policies amended) ahead of the start of any works.
It is important to involve a specialist insurance broker early in discussions to ensure the correct Joint Contracts Tribunal provisions are put in place to protect your assets and upcoming works and avoid any breach of contract. By doing so, a broker can help change the terms
if necessary and ensure the right insurance covers are put in place.
Colin Donnellon is associate director at Clear MPW Insurance Brokers