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EDITORS LETTER

VIEWProperty

Looking at the UK property owners’ business

In hot waterAvoiding potentially fatal mistakes when tackling Legionella bacteria

Rebuilding building services’ coverHow property owners will benefi t from integrated engineering insurance

Deterring uninvited guestsA six-point action plan from SitexOrbis

What’s the real damage?‘Statutory Clean Up Costs’ are now covered by Aviva

IN THIS ISSUE: An industry round tabletackles squattingAn industry round tabletackles squatting

EMPTY PROPERTY:

PROTECT AND SURVIVE IN ASSOCIATION WITH AVIVA

Experts’ practical advice on safeguarding

your investments from squatters and damage

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EDITORS LETTER

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EDITOR’S LETTER

Today’s landscape

Welcome to the second edition of ‘Property View’, published regularly by Aviva to tackle the topics of interest to the property owners’ market.

Once again, we’ve teamed up with ‘Property Week’ and other leading experts to bring you a round-table discussion. This time, we explore the growing threat of unoccupancy. With an ever-increasing number of empty properties, you’ll fi nd best practice steps to help avoid and deal with squatters. We also speak to SitexOrbis, our preferred supplier in this area, on effective preventative measures.

Aviva prides itself on being a market leader, which means constantly challenging what it offers. Recently, we’ve rebuilt our property owners’ policy. One hundred and fi fty changes later, we bring much needed clarity, simplicity and fl exibility to the sector. Several articles inside highlight the value of making these improvements – from simplifying engineering cover to safeguard a building’s plant and machinery to providing free Legionella

legal liability protection and Statutory Clean Up Costs cover in case of sudden or unforeseen pollution. The result is a far more integrated product than ever before that addresses real sector needs.

We hope you fi nd this issue useful. Your feedback would be much appreciated. Please send your comments by email to evolve@aviva.co.uk

Thank you.

With thanks to: Mark CoshEuropean Director of SitexOrbis

Peter Courtenay Risk Consulting Advisor, Marsh

Colin Davison Corporate Account Manager, Sitex Orbis

Ken Somervile Manager, SherGroup

legal liability protection and Statutory Clean Up Costs

would be much appreciated. Please send your comments

EMPTY PROPERTY:

PROTECT AND SURVIVE IN ASSOCIATION WITH AVIVA

Experts’ practical advice on safeguarding

your investments from squatters and damage

UNDERINSURANCE

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Brokers pick up underinsurance billIn the first edition of Property View, a round table of experts exposed the sector’s underinsurance woes. This time we ask: who is responsible when a building’s sum insured is wrong? Case law is increasingly pointing the finger at the broker involved, with costly implications.

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Making sure clients are suitably covered is a core part of a broker’s duty of care. When it comes to customers owning

property, this will often mean emphasising the need to review the adequacy of sums insured, which is best done by commissioning a professional building valuation.

In fact, experts are increasingly recommending property owners undertake valuations every three to five years, especially in the uncertain economic climate. Following legal precedents, many also highlight the need for brokers to incude a caveat in their terms of engagement so, if the client ignores their advice about commissioning valuations, the brokerage cannot be sued for wrongdoing. Even a dispute that doesn’t end up in court can be costly to resolve.

Making the pointOne legal case a decade ago emphasised a broker’s duty of care to advise its clients about the perils of underinsurance. Since then, the pressure on the profession has been mounting.

In the late 1990s, a manufacturer of paints, inks and other similar materials, submitted a claim for just under £8 million for fire damage to premises, plant, machinery and stock. The insurer paid out £5 million, while the remainder

was claimed from the client’s broker on the grounds of negligence.

The insurer believed it was entitled to repudiate the claim because the holder had failed to meet policy conditions (a yard alarm had been disarmed, for example). There also looked to be considerable underinsurance. However, it agreed to a £5 million settlement. The claimant then brought proceedings against its broker to recover the difference. The judge deemed it likely that the insurer would have applied an average clause, reducing the figure payable under the policy. The broker was found to be in breach of duty for not alerting its client, the claimant, to the significance of parts of the policy of insurance and to the possibility of underinsurance.

The case for regular valuations“Underinsurance is an increasing problem. It’s arguably more of an issue for property owners than other business sectors as there are contractual conditions under the lease that require full reinstatement of the building, irrespective of the insurance claims settlement.” As Matt Gordon, Aviva’s Commercial Property Owners Underwriting Manager, explains “With finance still difficult to come by and large amounts of spare cash an unlikely luxury, a worst-case underinsurance scenario could leave property owners unable

The benefits of having an up-to-date valuation• Ensures your Buildings Sum Insured

is adequate.

• Significantly reduces the risk of an underinsurance provision being applied to reduce the amount payable in the event of a claim.

• Enables Aviva or the loss adjuster to immediately focus on the claim rather than any underinsurance issue which might delay the repair process and lead to potential unrecoverable increased costs.

• Provides good corporate governance for any commercial business, helping to protect the rights of directors, employees and shareholders in the event of any insured major disaster.

• Allows buildings of historic or environmental value to be restored without being lost to the wider community due to a lack of funds.

• Provides peace of mind to all parties of the insurance contract.

Extras as standardAviva has recently turned a number of extras into standard policy features. This includes the ‘waiver of average’ for buildings valued within the last three years by an RICS-member surveyor, such as BCH. So if it transpires that the property is underinsured by, say, 25% when claiming for a partial loss, the client will still receive a 100% settlement (rather than 75%).

Underinsurance is an increasing problem. It’s arguably more of an issue for property owners than other business sectors as there are contractual conditions under the lease that require full reinstatement of the building, irrespective of the insurance claims settlement...”

Matt Gordon, Aviva’s Commercial Property Owners Underwriting Manager.

to meet their contractual obligations after a large fire. If this leads to a breach of any bank covenants, the mortgage company could foreclose on any loan secured against

the property. At this point, not only have property owners potentially lost an important asset, but they may also become technically insolvent if their tenants then successfully pursue them in court for breach of contract.”

Aviva’s preferred quantity surveyor and loss adjustor is Barrett Corp & Harrington (BCH). “BCH’s combined experience in insurance, loss adjusting and surveying lends the firm a different perspective into the valuation of buildings for insurance purposes,” says Gordon. “We’ve carried out due diligence of BCH and can thoroughly recommend their services, at competitive rates for our policyholders. An added advantage is that we will waive the average condition for our clients who commission BCH and have had a recent valuation in the last three years.”

BCH is regulated by the Royal Institution of Chartered Surveyors (RICS).

To find out more about BCH and the discounts you can receive as an Aviva customer, please go to... www.bch.uk.com/aviva-customers

Squatters are often portrayed in the media as modern-day Robin Hoods, while the residential or commercial property owner is left to pick up the

pieces. Mark Cosh, European Director of SitexOrbis, adds his professional advice on how to best deter squatters.

“There is no single solution for preventing squatting and the methods chosen depend on the location of the property,” explains Cosh, who cites two different approaches in one city, London.

“In the capital’s wealthy districts, such as Notting Hill, you don’t want to draw attention to an empty property. We use Videofied systems; alarms that trigger video to be transmitted to our operators at our response centre. The centre is manned all the time so an operator can set in motion the appropriate procedure or action a quick visit. We also operate regular patrols to inspect and check properties. These provide a visual presence, as well as take care of the details that count.”

It is important to prevent fly tipping at the property and, as previously touched upon, avoid the obvious signs of long-term unoccupancy, by sealing letterboxes for example. “In populated areas, neighbours are also given our 24/7 emergency number and encouraged to report any suspicious activity.”

Just five miles away on an east London estate, the solution is different.

“It’s very much about making an empty property more hassle than it’s worth to get in to. We fix steel security screens on windows and doors. We also use Videofied alarm systems and run patrols, sometimes employing a static (on-site) guard with a trained dog.” The use of human and canine can be an extremely effective pairing.

“Sometimes we need to increase the security level temporarily where squatters keep attempting to return to a premise. That’s been the case at the site of a former school, also in east London, that’s awaiting demolition. We’ve already secured the doors, windows and skylights, welded the gates shut and put up a concrete block to prevent access to the building and its open areas. The next step is to introduce a static dog team. You have to be as persistent as the squatters.”

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SQUATTER SOLUTIONS

Deterring uninvited guestsA six-point action plan from SitexOrbis

We use Videofied systems; alarms that trigger video to be transmitted to our operators at our response centre. The centre is manned all the time so an operator can set in motion the appropriate procedure or action a quick visit.”Mark Cosh, European Director, SitexOrbis

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SQUATTER SOLUTIONS

A six-point action planSitexOrbis recommends getting the property professionally surveyed and evaluating the recommendations. “We fi nd that a mixture, or all, of the following actions will deter squatters from gaining access to vacant properties,” adds Cosh. “The combination depends on the site’s location and history.”

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Cap off the utility services (electricity, gas and water). If refurbishing the property, remove the fuse board so electricity can’t easily be reinstated.

2

Fix metal screens onto the windows and doors, using either Sitex (a temporary screening material) or permanent PermaScreens.

3

Make use of a monitored alarm. A temporary wireless alarm that triggers video transmission to a 24/7 manned response centre is best. SitexOrbis’ centre is BS5979 accredited.

4

Install perimeter fencing or concrete blocks to prevent access to open areas, such as the property’s garden, a car park or a compound.

5

Remove all combustibles from inside the property, including beds, mattresses and rubbish.

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Use mobile or static dog patrols.

‘Gutting’ a propertyExtreme cases of squatting call for extreme measures. Cosh recounts a vacant block of fl ats in the capital that was due for demolition. “When we were appointed, there were 369 squatters in the 400-unit building. Once the bailiff had evicted the squatters, we moved in. We removed the copper, lead and combustible items. We covered the doors with anti-climb paint. We also put a guard dog team on site as this was a well-known location for squatters, who kept attempting to re-enter the site.”

SitexOrbis is a 24/7 property and people protection specialist that delivers hands-on expertise in vacant property protection and management throughout Europe. For further details, see www.sitexorbis.com

Commercial properties are also a target“Most people think squatters are only interested in occupying empty homes, but that is far from the case,” says Cosh. “New-age travellers often head for vacant commercial premises, where they can hide their caravans which aren’t road-worthy. These people tend to be young. They like to have big parties, can often cause a lot of damage and leave a great deal of mess, including broken-down vehicles. Empty commercial properties in London are particularly vulnerable and they can be occupied surprisingly quickly after a building is vacated.”

Other ‘squatters’ target commercial buildings to strip out the scrap metal and other materials inside. “One property had £1 million worth of wiring stolen, as the windows of the vacant site were easily accessible and the full security recommendation had been ignored. The client felt its own guards at the gate of the 30-acre site would be enough, but sadly that wasn’t the case,” adds Cosh.

Where Aviva helpsAviva has recently overhauled its Property Owners’ insurance policy. In relation to squatting, the following will be of interest.

Eviction of squattersInsurance now safeguards property owners’ income streams not just against damage, but against unfortunate events like illegal occupation too. If squatters move in, Aviva provides legal assistance to move them out.

Fly tippingCover for this is included as standard for costs up to £5,000. This is good news for both unoccupied and occupied properties. Prompt action helps prevent environmental deterioration, squatting or unhappy tenants.

UnoccupancyNo rented property is occupied 100% of the time. And in tough economic times, unoccupancy may be more likely. To avoid uncertainty, Aviva’s policy now clearly defi nes after what period of unoccupancy the property owner needs to take action to ensure insurance cover is in place.

In populated areas, neighbours are also given our 24/7 emergency number and encouraged to report any suspicious activity.”Mark Cosh, European Director, SitexOrbis

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bUILDINg SERvICES’ COvER

Rebuilding building services’ coverHow property owners will benefit from integrated engineering insurance

Aviva has taken stock of the way it, and the insurance industry in general, protects a building’s plant and machinery. The result is a

seamless way for property owners to know they are fully covered. There is also useful new protection as standard, an increased limit and practical external support to meet legislation, says Gary Thom, Senior Underwriter for the insurer.

Passenger and service lifts, air-conditioning units, hot water and heating supplies, electrical installations such as fixed wiring, standby power generation equipment… These are all plant and machinery items that invariably fall under the responsibility of property owners, especially those with commercial premises. “It’s essential to have full cover in place for these items as you would for the property’s fabric,” stresses Gary. “Aside from the normal range of perils a building may suffer, there are inherent engineering risks with operating equipment. The sudden, unexpected failure of an item breaking down while in use, electrical shorting or burning out, operator error and even the damage caused by frost or vermin can all prove costly.”

Engineering insurance provides cover against damage that is excluded under a property damage policy, including pressure explosion, collapse of pressure items and the breakdown

of electrical and mechanical plant. The problem property owners and their brokers face is the complexity of making sure that every item is fully covered. This is especially challenging for those owners with large portfolios.

“Engineering and buildings’ cover has always been available, but the industry has traditionally treated each separately. Engineering insurance is very much a bolt on. So if lifts serve a building, for example, the underwriter needs to know how many lifts and the number of floors served by these lifts. Add up all the details required for a property’s entire building services and then multiply that for several premises and you can see why the information-gathering exercise causes headaches. Policyholders are unclear if they’re fully covered. Are they OK if there’s sudden or unforeseen damage? And in the event of damage, do they need to make an accidental or breakdown claim? What if they’ve omitted an item by mistake?”

The answer is to simplify the process, entirely. “Now, as long as the building’s sum insured is correctly declared, we’ll insure the plant and machinery as part of a single Property Owners’ policy. We no longer require detail after detail and the property owner can be sure that the engineering part of their cover dovetails seamlessly with their buildings’

insurance. This new way of thinking will speed up the time it takes to put in place or renew cover, and to make a claim. It’s all the protection property owners need, in one place, through a single contact.” As Gary Thom put it “It is only if a building has primary power generating plant or individual items that require substantial sum insured figures (of £250,000 plus) that further details will be required.”

The insurer has also taken a good look at its old proposition and what is available in the market place. “We’ve been able to make several improvements to create what we believe is the best Property Owners’ standard insurance package out there. To a £250,000 limit of indemnity, we now offer £500,000 cover for damage to surrounding property, for example.” Previously, this was £250,000. “Additional, new protection covers inadvertent failure to insure, increased cost of working, loss of contents of oil storage tanks and reinstatement of data or programs (on building management systems).” An enhanced offering is also available for those with larger portfolios. “Where needed, additional clauses can include cover for loss of rental income, auditor and professional accountant’s fees and payments on account.

Now, as long as the building’s sum insured is correctly declared, we’ll insure the plant and machinery as part of a single Property Owners’ policy.” Gary Thom, Senior Underwriter, Commercial, Aviva

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bUILDINg SERvICES’ COvER

“Our market-leading policy can also include the excellent engineering inspection support services from our preferred supplier, Bureau Veritas (BV), at competitive rates.”

BV offers a full range on inspection and verification services to ensure plant and machinery comply with the appropriate legislation. As Gary Thom put it, “BV also advises clients on associated problems and provides the very latest pro-active maintenance management solutions.” This includes the use of Infrared Thermography or Thermal Imaging to detect loose or corroded connections. “Besides providing peace of mind, this type of service picks up potential faults before they happen and saves unplanned machinery downtime. It’s an excellent benefit, particularly for commercial property owners, over and above our new, improved policy.”

How building services are now protected

Limit of Indemnity £250,000

Damage to Surrounding Property £500,000 (was £250,000)

Debris Removal £25,000

Loss Avoidance Measures £25,000

Repair Investigation Costs £25,000

Supplementary Expenses £25,000

Temporary Hire of Replacement Plant or Machinery £25,000

Temporary Removal £100,000

New, additional benefits

Inadvertent Failure to Insure £250,000

Increased Cost of Working £100,000

Loss of Contents of Oil Storage Tanks (per Tank) £10,000

Reinstatement of Data or Programs (on building management systems)

£25,000

EMPTY PROPERTY: PROTECT AND SURVIVE IN ASSOCIATION WITH AVIVA

Experts’ practical advice on safeguardingyour investments from squatters and damage

OUR PANEL OF EXPERTS

PETER COURTENAY is risk consulting adviser at Marsh

SIMON MARTELL is business manager at Aviva

COLIN DAVISON is corporate account manager at SitexOrbis

ALLISTER SMITH is property risk manager at Aviva

MATTHEW GORDON is underwriting manager at Aviva

RICHARD HEAP is Property Week’s professional editor

ASKING THE QUESTIONS …

ABOUT THIS FORUM …This forum was hosted by Aviva at its o� ce at 51-54 Fenchurch Street, London EC3M 3LA.

If you are interested in hosting or participating in future events, please contact Niki Kyriacou, global client solutions manager, at Property Week, Ludgate House, 245 Blackfriars Road, London SE1 9UY. Tel: 020 7921 8255. Email: niki.kyriacou@ubm.com

A FORUM HOSTED BY

Squatting is a problem that a ects all types of property owners. Squatters can use unlet shops to sell knock-o gifts in the run-up to Christmas, while groups of travellers occupy warehouses to protect their caravans from bad winter weather. Even homes in London’s Mayfair are not exempt, although the squatters there call themselves “artists”.

The economic downturn has exacerbated the problem and put owners at more risk. In September, research � rm the Local Data Company estimated that one in eight UK shops — almost 117,000 — is vacant, and the Empty Homes Agency estimates 764,000 homes are empty in the UK.

And while tenant demand remains weak, the o� ce and industrial sectors are also at risk. Where there are empty properties, squatters soon follow, especially if appropriate measures are not taken to improve security and protection.

October’s Comprehensive Spending Review is unlikely to help matters. Large cuts to public sector budgets mean public sector bodies will have to leave buildings they occupy and spend more on security to prevent squatters moving into them. The large cuts to their budgets mean that in many cases this will not be possible.

However, the government is planning to target squatters with new legislation. The Ministry of Justice last month announced that it intended to make squatting a criminal o ence in England like it is in Scotland. The government has also published a guide giving advice to owners of commercial

and residential properties to keep squatters out. Simon Martell, business manager for insurer Aviva’s national and European property owners’ insurance team, says squatting has become more prevalent.

“There are larger numbers of properties left to rot,” he says. “We’re faced with situations where the property owners don’t have the � nances or the ability to put money into developing, renovating or speculative lets. They won’t commit money if they think they are more likely to get better investment returns elsewhere.

Aviva has seen claims for the eviction of squatters double in the last year. In some cases, claims are for more than £1m because it is not just costly to remove the squatters. They can also cause � res, either on purpose or by rewiring the electrics, and water damage if they have removed pipes, in addition to other harm to the property.

There are knock-on e ects, too. If it takes three months to evict squatters — and often longer using the county court system — that is three months that the owner cannot let the property, and so lose out on rent. In some cases, owners have agreed deals to sell buildings, only for squatters to move in and the deal to collapse.

Worse, if an owner follows the correct procedure, when it comes to claiming on its insurance for damage to its property, it may � nd an insurer unwilling to pay out or only prepared to pay a much lower amount than the value of the damage.

FIVE WAYS TO KEEP SQUATTERS AT BAY

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There are larger numbers

of properties left to rot

SIMON MARTELL, BUSINESS MANAGER, AVIVA

Aviva gathered a group of industry experts for a roundtable discussion that set out the most important steps for a landlord to keep squatters out, or get them out once they’re in. Their advice can be broken down into � ve main points.

1 TELL YOUR INSURERWhen you know that a property is becoming empty, you need to tell your insurer, because if you don’t, this puts you in breach of your “change of occupancy clause”.

Martell says property owners should be aware of the terms of their insurance, and that brokers should make sure they explain to owners exactly what they are buying.

Peter Courtenay, risk consulting adviser at insurance broker Marsh, says that property owners can become unstuck if a tenant on a long-term lease moves out of a building but does not tell the owner the building is becoming empty.

“They have broken a lease condition, and the landlord is not in compliance with the insurance conditions but the landlord is still liable. It’s something that landlords need to remind their tenants about on a regular basis,” says Courtenay.

2 DO THE SIMPLE THINGSWhen a property becomes empty, the property owner should carry out a comprehensive risk assessment, which should also include the risk of the property from squatters or criminals. They should check for risks from � re and water damage, such as through freezing pipes as the seasons change.

Courtenay says this frequently doesn’t happen: “I would say 85%-90% of the time, the landlord has advance notice of the

property becoming unoccupied. An opportunity needs to be taken then to assess the risk of attack and to manage that risk.”

He says that one of the simplest steps is to turn o� the water supply at the main stop valve, as this can stop extensive damage to the property if criminals break in and steal copper piping.

“There have been numerous claims of water damage occurring over the period of a week because no one’s gone in to check, therefore water has just kept pouring out,” says Courtenay.

Turning o� the electricity can also help to reduce the risk of � re, and of criminals injuring themselves if they tamper with the electrics — for example, to install improvised heating.

Property owners may not care what could happen if a criminal breaks into their building: after all, they shouldn’t be in there in the � rst place. However, the Property Owners Liability Act puts an obligation on the person in control of the premises to make sure they are safe for anyone that goes into them.

Aviva’s Martell agrees: “There will be a duty of care to anybody on the property, whether they’re on there legally or illegally.” If somebody injures themselves on the property, this can expose the property owner to claims by “ambulance-chasing” law � rms.

Colin Davison, corporate account manager, SitexOrbis, which manages empty properties on behalf of owners, says that owners can protect themselves if they can show that they have taken precautions to stop people getting into the building.

“The law changed 18 months ago, so the onus is more on the property owner in the case of a break-in to show they’ve taken reasonable precautions to stop people trespassing. If they

SIMON MARTELL, BUSINESS MANAGER, AVIVA

«

85%-90% of the time, the landlord has advance notice of the property becoming unoccupied. An opportunity needs to be

taken then to assess the risk of attackPETER COURTENAY, RISK CONSULTING ADVISER, MARSH

If they break in and injure themselves,

they can still sue for any injury or damage

that has been caused to them

COLIN DAVISON, CORPORATE ACCOUNT MANAGER,

SITEXORBIS

PETER COURTENAY, RISK CONSULTING ADVISER, MARSH

COLIN DAVISON, CORPORATE ACCOUNT MANAGER, SITEXORBIS

SQUATTERS’ RIGHTS: ONCE IN OCCUPATIONS, INTRUDERS CAN BE DIFFICULT AND COSTLY TO REMOVE

SQUATTOCCUPADIFFICU

break in and injure themselves, they can still sue for any injury or damage that has been caused to them,” says Davison.

He adds that when owners assess the risk of squatters and vandals, they should realise that di� erent parts of buildings can be exposed to di� erent risks.

“A lot of it is common sense,” he says. “A property in a poorly lit area will be at more risk than one in a well-lit area, for example.”

He adds that squatting is a bigger problem in the south-east than other areas of the country because of the higher cost of living, even though there are more empty properties in other parts of the country.

There are some steps a landlord can take to help reduce the risk of attack. The main one is to remove signs that the property is not occupied. If the property has a glass front door, then a large pile of post behind the door is a clear sign that nobody has been in and checked the property for a while. It is also a   re risk.

“We’d always recommend sealing up letterboxes,” says Davison. “If there’s lots of post, and someone sets   re to something and puts it through, then it doesn’t take long for the � ames to spread and the whole property can be burnt down.”

He says that owners of properties with grass outside should make an e� ort to cut it, because long

grass is another sign that a property is unoccupied. Taking action to clean up gra� ti, y-tipping and other signs of disuse are important too. These are the simple steps an owner can take, but they will want to look at security as well.

Marsh’s Courtenay adds that short-term letting of a property at a reduced rental, such as for seasonal use at Christmas, is another of option to avoid unoccupancy. Even letting to a charity for fundraising may cover outgoing council taxes, ensure attention to security and monitor general condition.

3 INSTALL THE RIGHT SECURITYNo property owner wants their high street shop or glass-fronted o� ce block to look like a maximum security prison. But there are a couple of measures that are not punitively expensive and also make it easier to guard against squatters.

Allister Smith, property risk manager at Aviva, says it is worth owners making the e� ort to make sure they get it right.

“If the owner can put that building to sleep right � rst time and maintain regular site inspections, it makes a big di� erence to the way that building remains protected. You can pick up the telltale signs of decay at an early stage and take remedial action to protect against those larger intrusions or events,” he says.

Davison from SitexOrbis says that the most important piece of security is a wireless temporary alarm with a video feed. The camera is activated when a break-in occurs, and then the pictures of the break-in are sent back to a SitexOrbis alarm-receiving centre. Somebody at the centre can then call the police to report the break-in as it happens.

He says that to prevent squatting, catching this initial break-in is more important than catching the squatters themselves. This comes down to an important legal principle.

That principle is this. Squatting is not a crime in England and Wales, so the police have limited powers to get involved. As such, it is dealt with as a civil matter rather than a criminal matter. This means that the police in England and Wales avoid cases involving squatters because they are worried about exceeding their powers.

Police will intervene if there is a break-in, though, as that is a criminal matter. If a property owner wants to get police support then they need to focus on this break-in.

Squatters are aware of this principle because advice for squatters about their legal rights is disseminated through the internet. Therefore, squatters will send one person to carry out the initial break-in. Once the property has been broken into and is easily accessible to squatters, then the person who did the break-in will leave the site.

Shortly afterwards, the group of squatters will turn up. Legally they are allowed to access the property if they do not cause criminal damage in the process, and once they have done that then they can exercise their squatters’ rights.

That is why a quick police response to the initial break-in and being able to provide video evidence of the crime is important.

MATTHEW GORDON, UNDERWRITING MANAGER, AVIVA

An alarm system and the surveillance along with it can be cheaper than routine visits by a

guarding companyPETER COURTENAY, RISK CONSULTING ADVISER, MARSH

ALLISTER SMITH, PROPERTY RISK MANAGER, AVIVA

“We will pick up the phone to the police in that area and say there is a break-in and that they should go there straight away. That is a far more e� ective way of dealing with squatters and travellers: that helps the property owners, the insurance companies and others to see a live recording of somebody physically breaking in,” says Davison.Marsh’s Courtenay adds that there is no need for an alarm system to be as sophisticated as one that complies with police policy, if the   rst response is to be by a guarding company. Guard attendance will   lter out any false alarms and if the guard sees the criminal activity, he then calls police to come to the scene of the crime.

“There are certain circumstances where approaching by that route, you will get the police there quicker than if you had a police-compliant alarm system,” says Courtenay.

“An alarm system and the surveillance along with it can be cheaper than routine visits by a guarding company. By mixing the security disciplines, by putting in a blend of the security systems that are available, you will   nd a system that the landlord   nds cost e� ective.”

Courtenay says that these security measures do not need to be a huge cost for the owner, who might be able to do a deal with the tenant to continue with the system.

He adds that when a property becomes unoccupied, there is also scope for the landlord to do a deal with the tenant to leave any of their security in place: “Often the outgoing tenant will remove many of those devices,” he says.

It is also worth owners spending a little money upfront to prevent squatters getting in, because otherwise they may have to pay to go through the whole legal process.

Any security measure does not need to make your property completely impenetrable, but does need to make the squatter think that they’d rather go for an easier target.

As Davison from SitexOrbis puts it: “If you’ve got one particular area where it’s secured, they won’t think, ‘We’ll take that on.’ They’ll move to an area where it’s not secured, which is an easier option for them.”

4 KEEP TABS ON THE FIRMS YOU USEIf you are employing a security guard or a managing agent to look after your building, then you need to ensure they are doing what you are paying them for. Otherwise, you are at risk that their negligence could invalidate your insurance.

Owners should ensure that any guards they use are regulated by the Security Industry Authority. If the police do have to come to a property for any reason, it is much better to have a licensed security   rm to deal with them than an unlicensed — and potentially disreputable — operator.

If a security guard is meant to be monitoring a property then the owner needs to put in place checks to ensure that the guard is actually walking around the building at night, not just sitting down in front of the TV. One way to do this

If the owner can put that building to sleep right first time and maintain regular site inspections, it makes a

big difference to the way that building remains protectedALLISTER SMITH, PROPERTY RISK MANAGER AT AVIVA

PREVENTION AND CURE: AVOID TELLTALE SIGNS OF VACANCY, SUCH AS A BUILD-UP OF POST, AND TAKE ADEQUATE SECURITY MEASURES AGAINST TRESPASSERS

››

STATUTORy CLEAN Up COSTS

What’s the real damage? ‘Statutory Clean Up Costs’ are now covered as part of Aviva’s public liability policies for commercial property owners.

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can be by putting in barcodes at points around the building that the guard needs to scan every hour. The main thing that property owners need to have is evidence that they have carried out these checks. Otherwise, it makes it harder for insurers to trust that they have gone through the right procedures to ensure security at their properties.

It is the same situation for managing agents. If the owner does need to make a claim, it needs evidence that the agent has done what it says it has done.

SitexOrbis’ Davison says he knows of one case where it took an owner three months to pull together the evidence the insurer needed because the managing agent did not keep records of their visits.

“The property owner struggled to come up with satisfactory evidence and the insurer refused the claim,” he says. Davison says SitexOrbis takes photos and uses handheld computers that are date and time recorded, so it has evidence that a check has been done.

Matthew Gordon, underwriting manager at Aviva, says that using reputable   rms helps to maintain insurance and keeps down the cost of premiums.

“If we saw a property owner using a very reputable managing agent, we will know that the managing agent has very solid systems to check, good governance and they will be managing it through reputable people,” says Gordon. “A good managing agent is de  nitely an asset.”

He adds that providing a managing agent with a checklist that relates to the site can ensure a standard of surveillance.

“We know of situations where the managing agent has tried to save money, and just driven past the property in a van. For insurance purposes, it’s meant to be internal and external inspections, and not doing that is clearly much worse in case the worst does happen,” he says.

5 GET THE SQUATTERS OUTSometimes squatters will get in, and getting them out is not easy as many property owners think. That is because squatting is not recognised as a crime in England and Wales, and because there is a lengthy county court process to evict squatters.

There is no o� cial timeline and the whole process can take more than three months. However, it tends to go like this:■ A property owner   nds squatters in their building so goes to a solicitor. At this stage you will need to provide evidence that this property is yours. This can mean   nding Land Registry documents, title deeds and so on.■ After this, the owner can apply to the county court to start

the eviction process. The court has 28 days to reply. That is one month since the squatters took occupation.■ The court gets back to the owner and says it has a hearing in, for example, nine weeks, although it depends in which area you are. In this case it has been three months between the squatting started and going to court.■ If the squatters put up a good   ght in court then, even if you win right of possession, they may get a stay of execution. It could take two weeks to   nally get them out after this.It can often be better to pay more to take the case to the High Court, as this allows owners to get rid of squatters a lot more quickly. Once a High Court order is granted, enforcement o� cers can remove squatters using reasonable force and take possession the same day.

High Court Enforcement O� cers (HCEO) are private companies, while county court baili� s are civil servants. On 1 April 2004, the previous system of sheri� s’ o� cers was replaced. This change passed powers to High Court Enforcement O� cers and gave them the power to enforce High Court writs.

Using High Court Enforcement O� cers is more expensive but it is also quicker. The extra cost is based on the hourly rate of the enforcement o� cer, but the squatters can be evicted on the same day, whereas with the county court it may be 12 weeks.

BE PREPARED ...Property owners hope they will never have to get rid of squatters. However, hope cannot take them anywhere. There are more useful precautions they can take from the risk assessment, to installing security and using reputable partners.

The government has taken its own steps to help. In November, it published an online guide for property owners to keep out squatters. It was an attempt to counteract the numerous websites that tell prospective squatters how to break the law.

The Ministry of Justice is also looking to make squatting a criminal o� ce in England, as it is in Scotland.

Squatting is a risk in any market and will not go away when the property market does eventually recover. With everybody under   nancial pressure, protecting assets that are not generating any income can seem like an unnecessary burden. But reinstating a damaged building without insurance support would cost much more.

The views expressed in this publication are those of the author and not of Aviva

«

We know of situations where the

managing agent has tried to save money, and just driven past the

property in a van

MATTHEW GORDON, UNDERWRITING MANAGER,

AVIVA

STATUTORy CLEAN Up COSTS

Our decision to include Statutory Clean Up Costs cover as part of our Property Owners’ public liability policy clarifies a hotly debated topic as to what exactly are damages. Our aim is to reassure clients as much as we can that they are protected against the issues of the moment.”Matt Gordon, Commercial Property Owners Underwriting Manager, Aviva

he number of pollution incidents is on the rise. The Environmental Agency cites 723 cases in 2008 that had a serious impact on the

environment (in England and Wales). Until now, however, the cost of cleaning up the damage following enforcement action – over £3 million in business fines in 2008 – has fallen outside of public liability insurance.

Historically, most Property Owners’ public liability policies were designed to cover legal liability where there were third-party damages from sudden or unforeseen pollution. Yet, as more legal cases are showing, property owners can also be liable for Statutory Clean Up Costs, as well as the expense of carrying out work to prevent any further incidents.

This is not just for cases where the property owner is directly responsible for the pollution. Owners are also increasingly brought to court in the ‘absence’, which often means the insolvency, of the tenant who caused the damage.

An accidental oil spill is a common cause of commercial pollution and makes for a good illustrative example of a claim that would not generally be covered under a standard public liability insurance policy.

Leasing an industrial unitA property owner rents an industrial unit with oil-fired heating. There is no full repairing lease and, consequently, maintenance falls to the owner rather than the tenant. During a standard maintenance visit, a key pipe is accidentally broken, resulting in oil escaping into a nearby river. The Environment Agency steps in. The subsequent remediation costs are charged back to the property owner. It is worth noting that, even with a full repairing lease in place, the owner may still have had to pick up the clean-up costs if the tenant’s business had folded.

Fresh thinking for peace of mindAviva now provides its customers with £100k Statutory Clean Up Costs cover for any one period of insurance. The insurer will also consider a limit increase of up to £5 million for an additional premium.

T The damages’ definition debate: Bartoline v RSA*This case raised the issue of whether Statutory Clean Up Costs and the cost of complying with the Environment Agency’s work notices were ‘damages’ under a public liability policy

The backgroundFollowing a fire at the premises of Bartoline, an adhesive manufacturer, in May 2003, chemicals and fire-fighting foam seriously contaminated two nearby watercourses, their beds and banks. The Environment Agency used its statutory powers to carry out emergency clean-up works and sought to recover the cost of this (£622,000) from Bartoline. It also served a works notice on the manufacturer, requiring the firm to carry out further work costing an additional £148,000.

The issueBartoline claimed the expenses incurred by the Environment Agency under its public liability policy. The insurer refused indemnity, stating that the claim did not fall within the scope of the insuring clause in the policy. This provided cover for: ’legal liability for damages in respect of …damage to property…

nuisance, trespass to land or interference with any easement right of air light water or way’.

Bartoline disagreed and brought a claim against the insurer for breach of contract, arguing for a wide definition of damages.

The judge considered whether the liability of Bartoline to the Environment Agency, and the additional costs to meet the works’ notice, could constitute a legal liability for damages.

The outcomeThe judge found that the clean-up cost expenses – ‘damages’ – were not covered under the policy. The liability to repay expenses incurred by the Environment Agency and the liability to pay damages in tort (a civil wrong other than a breach of contract) were described by the judge as ‘different animals’.

* Sourced from www.out-law.com/default.aspx?page=9300

This information is prepared by the lawyers at Pinsent Masons. Please remember, though, it’s intended as general information only. It’s not legal advice.

Extras as standard Aviva has recently turned a number of extras into standard policy features. This includes cover for Statutory Clean Up Costs as part of a standard public liability policy for property owners. The insurer is also looking to clarify policy definitions where there is potential costly confusion.

LEgIONELLA

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In hot water: Avoiding potentially fatal mistakesAdvice for property owners on tackling the growth of Legionella bacteria

Outbreaks of Legionnaires’ disease make headline news, such as the tragic case in South Wales this September. Simon Cook and Ian

Haskins from Aviva explain why the insurer now provides free Legionella legal liability cover and offer advice to residential and commercial property owners on managing this serious risk.

In the UK, there are some 500 outbreaks of Legionnaires’ each year (with roughly half of this number being the result of people contracting the disease while travelling abroad). In one out of ten cases, the infection is fatal. The disease is caused by the bacteria Legionella pneumophila, which occurs widely in rivers and ponds and grows in almost any artificial or engineered water system. While the most devastating outbreaks are traced back to cooling towers or evaporative condensers, typically those associated with air conditioning in buildings, any hot and cold water system, including those used in homes, can harbour the bacteria.

“The inclusion of free Legionella cover is timely in a couple of respects,” says Ian Haskins, Senior Underwriter within Aviva’s Casualty Class Team. “Outbreaks of the disease have dominated the press recently, while important changes to the Health and Safety Commission’s Approved Code of

Practice (Legionnaires’ disease: The control of legionella bacteria in water systems or ACOP L8 (ISBN-0-7176-1772-6)) make the legislation especially relevant to any provider of residential accommodation.” One of the significant amendments is the removal of the 300-litre limit for hot and cold water services, placing all premises with water systems – including small domestic systems – within the scope of the revised Code.

The HSE’s Essential information for providers of residential accommodation spells it out for its audience. ‘Ask yourself: If a boiler, tap or shower head breaks/leaks who is responsible for getting it repaired? If it is you, then you need to be aware of the legal requirements in this guidance.’ Even a pipe that once fed a washing machine can fill with stagnant water; a potential breeding ground for Legionella.

“Provided ACOP L8 or any amending Code of Practice is followed, which dictates having a suitable water system management scheme in place, the risk of Legionella developing is significantly reduced. Having recently overhauled our proposition to property owners, this was one of the areas where we could help relieve some of our clients’ anxiety and add value. As long as our policyholders comply with the appropriate legislative requirements, we automatically provide free Legionella legal liability cover of up to

£1 million, including costs and expenses.” In the majority of cases, there is no longer the need for clients to fill in a site-specific questionnaire. Ian lists a handful of exceptions to this new policy enhancement: “We still require a completed questionnaire, and possibly an additional premium, where the client has had a previous Legionella outbreak or is looking to insure a higher-risk property, such as leisure centre, hotel, hospital or nursing or care home. The same is true where there is a potential accumulation of immunosuppressed patients and/or water-based leisure activities.”

Who’s to blame if bacteria breaks out?“Given the serious repercussions of an outbreak, the authorities take a hard line on gross dereliction of duty when managing artifical water systems,” emphasises Simon Cook, Liability Class Specialist at Aviva. “And it is the property owner who is ultimately to blame, even if a third-party specialist is being used… You can delegate the task, but never the responsibility.”

As long as our policyholders comply with the appropriate legislative requirements, we automatically provide free Legionella legal liability cover of up to £1 million, including costs and expenses.”

Ian Haskins, Senior Underwriter, Casualty Class Team, Aviva

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LEgIONELLA

Simon cites the 2002 Barrow-in-Furness case where seven members of the public died and many more suffered ill health as a result of catching Legionella at a council-owned arts-and-leisure centre. “Errors made during the negotiation of contracts led to the absence of chemical dosing, regular system checks and dip-slide testing of the building’s cooling towers, which had been part of the management plan for many years. You could argue that the contractor engaged to manage Legionella risks should have known better, but ultimately it was the Council’s responsibility.” Both the Council and one of its employees who had responsibility for managing contracts were successfully prosecuted for Health and Safety offences, after originally being accused of Gross Negligence Manslaughter. The individual had to pay a personal fi ne of £15,000.”

This brings to light one of the key requirements of the Approved Code of Practice: to appoint a ‘responsible person who will oversee the implementation of any controls that are needed’.

Not for DIY-ers“Given some of the horrors I’ve seen on site over the years, I don’t subscribe to a DIY approach to managing water systems,” says Simon. “My advice to property owners is to use a competent and qualifi ed third party and get some good risk advice.”

“Make sure you check the competency of the specialist you’re considering. Are the systems and testing labs they use accredited? How often do they train their staff? Can they provide a successful track record of managing water systems, along with references from clients? Does the fi rm have adequate insurance itself? Do they know about the HSE’s code of conduct for Legionella risk management providers? These are all questions worth asking.”

What to watch for“The fi rst task any competent contractor should do is carry out a holistic risk assessment, reviewing the complete water system, and then put in place a written scheme for managing Legionella risks. Missing a deadleg or a tap that’s no longer used, for example, can have serious implications later. Don’t trust any supplier who jumps straight in with a maintenance plan without fi rst doing a complete risk assessment or whose quote is signifi cantly lower than other professionals; there’s probably a good reason for the difference.”

Engaging with the contractor is fundamental. “It’s common for people to assume that, once they’ve paid the invoices, the matter is sorted. But most prosecution cases involving Legionella outbreaks arise because of assumptions made somewhere down the line.” Property owners should also make sure that there is an offi cal record-keeping process and relevant staff or contractors are accurately reporting the details. “You need confi dence that all the controls identifi ed in the risk assessment have been implemented. If you are investigated by the enforcing authorities and can’t say ‘here are the records of all the checks and details of the competencies of the people undertaking the work’ then you could be in all sorts of bother and have enforcement action taken against you.”

Property owners should also be on guard if they wish to deviate from a management scheme or are thinking of making a change to it, however small. “It’s always best to seek professional advice fi rst, before acting.”

Simon adds one fi nal piece of advice: “If you own, or are responsible for a number of buildings or have buildings with a signifi cant Legionella risk or a history of outbreaks, consider some formal training for the nominated ‘responsible person’ so he or she understands the Code and their responsibilities. That’s an area where our risk management specialists can help out.”

Further help and supportAviva Risk Management Solutions (ARMS) publishes useful free Hardfacts covering this topic. Go to www.aviva.co.uk/risksolutions and click on the ‘Knowledge store’ button, where you can search for ‘Legionella’.

The HSE website publishes news and several guides on Legionella, with the majority of these being free to download.Visit www.hse.gov.uk/legionnaires

If you have any questions on your responsibilities, try contacting the Environmental Health Offi cer at yourlocal authority.

Aviva Risk Management Solutions (ARMS) also provides formal in-company training on the duties of a responsible person managing water systems and Legionella.

Call 0500 55 99 77 for details.

Did you know?Every cooling tower and evaporative condenser must be registered with the HSE. See the HSE website for further details and the appropriate form.

Extras as standardAviva appreciates that dealing with legal matters is part and parcel of the property-owning business. It now provides automatic legal cover to protect property owners against the legal costs involved when defending libel, slander and corporate manslaughter claims, dealing with a property that’s been used for illegal drug cultivation and to cover increases in court attendance payments, as well as the legal costs involved in evicting squatters.

HSE is the national independent watchdog for work-related health, safety and illness.It is an independent regulator and acts in the public interest to reduce work-related death and serious injury across Great Britain’s workplaces. For further details, see www.hse.gov.uk

Lifting the lid on LegionellaThe agent that causes Legionnaires’ disease is a bacterium called Legionella pneumophila. People catch Legionnaires’ disease by inhaling small droplets of water suspended in the air, which contain the bacteria.* Within 2 to 10 days following exposure, those affected suffer a fl u-like illness. As the pneumonia develops, abdominal and chest pains, vomiting and diarrhoea and hallucinations are common. The infection proves fatal in one out of ten cases.

Legionnaires’ disease is not contagious; it cannot be passed from one person to another. The name derives from the disease and bacterium’s fi rst discovery, following an outbreak at an American Legion convention in Philadelphia in 1976.*HSE (www.hse.gov.uk/legionnaires/whatis.htm#what).

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How a new VAT rate might affect the sum insured

Here, is a simple illustration.

An office block, which has been professionally re-valued by an RICS surveyor, has a rebuilding cost of £10 million. Normally, RICS surveyors calculate valuations without an allowance for VAT, as they won’t know the VAT status of their clients. If the property owner isn’t VAT registered, they must include an allowance for this tax in the sum insured.

• Before 4 January 2011, the sum insured would be £11.75 million (£10m + 17.5% VAT).

• From 4 January 2011, the sum insured should be £12 million (£10m + 20% VAT, excluding any provision for inflation).

In other words, the sum insured figure has increased by 2.1%.

If a loss were to occur after the 4 January 2011, but the sum insured was set before this date, the shortfall of 2.1% would be taken into account in any insurer’s average calculation. This would increase the likelihood of underinsurance.

What does this mean for brokers?As demonstrated by case law (Byas Mosley & Co v JW Bollom & Co Ltd), brokers have a duty of care to advise their clients to review their sums insured if there is any known reason why they may not be adequate.

In a worst case, a breach of this duty could lead to the broker being held responsible by the client for any shortfall in claim settlement. But…

Good news for Aviva Property Owner policyholdersIf the shortfall for reinstating a building is solely due to the increase in VAT and no other aspects, Aviva will not apply the Condition of Average to any existing policyholder up until first renewal on or after 4 January 2011.

In addition, Aviva’s offer extends to contents of communal areas and garden equipment.

However, the maximum Aviva will pay remains the sums insured.

VAT: A taxing time?VAT increases by 2.5% in the New Year. What are the repercussions for property owners and how can insurers help alleviate concerns? Aviva has some answers.

vAT INCREASE

Covering human errorAviva also appreciates that to err is human and there are sometimes circumstances where a property owner may inadvertently fail to include VAT on a property, where this needed to be included. In these situations, providing reasonable precautions have been taken, a special Property Owners VAT clause provides additional peace of mind.

A good time to revisit your coverFor non VAT registered customers, the new rate of VAT is likely to mean an increase in the rebuilding cost of commercial properties. Make sure you avoid the underinsurance trap by using Aviva’s preferred supplier, Barrett Corp and Harrington, to get a discounted rate on property valuations.

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pOLICy ROUND Up

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Did you find this edition of Property View useful? Are there any topics you would like us to cover next time? If so or you have any feedback, please email: evolve@aviva.co.uk

A new horizonAviva has remodeled its insurance offering to property owners. Rationalised policy wordings and all-encompassing solutions bring unprecedented simplicity, clarity and breadth of cover – throughout Europe – to the sector. To this, add flexibility where it’s needed and the expert support of specialist underwriters.

SimplicityAviva’s ‘standard’ policy now has all the right ‘extras’ built in, including optional Engineering cover. Virtually every sizeable building today has plant, machinery and systems – from lifts to environmental management control solutions. With knowledge of the building’s use to hand, Aviva now provides engineering quotes and cover as part of the overall plant sum insured figure. There’s no longer the need to supply a complete breakdown of the individual value of items.

ClarityAviva has been through its policy wordings to identify and remove grey areas. For example, the insurer has stated its intent to provide cover if a property has been used for the illegal cultivation of drugs or suffered damage caused by munitions of war or following forced entry by an emergency service. Failure of third-party insurances is also included.

BreadthIn the modern world, righting the regulatory aspects after a claim can sometimes cost more than the repairs. Then there are environmental issues and growing areas of concern. Aviva now includes the following as a matter of course.

Eviction of squattersAviva provides legal assistance to move out squatters.

Waiver of averageIn cases of underinsurance, Aviva will waive the average condition and settle in full provided there’s a professional RICS valuation every three years, and the sum insured is index-linked.

Environmental clause‘Like-for-like’ replacement doesn’t always take into account new standards. Where there’s call for a reinstatement to be more energy-efficient than before, Aviva will cover the reasonable extra costs.

Fly tippingAviva recognises that fly tipping needs to be dealt with promptly to prevent environmental deterioration and unhappy tenants.

Legionella and Statutory Clean up costsThese are both pollution and contamination related covers which have not been historically covered as standard. However, with environmental awareness and supporting legislation ever growing we felt it was important to provide our clients with cover for these potential legal liabilities.

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EDITORS LETTER

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