After a month of Lockdown 3.0, many businesses continue to be restricted in what they are able to do, with ‘non-essential’ businesses facing continued closure due to the Government imposed restrictions, and others being able to operate only click and collect or takeaway services. Some closed businesses are doing the best they can in the circumstances by using their premises for other purposes including as vaccination sites.

In all of the above ‘lockdown’ situations, it’s always good to be mindful of insurance implications for your commercial property.

Forced Closure

For businesses that have been forced to close, it is important to consider the terms of your commercial property insurance. Many standard insurance policies will include clauses with regards to unoccupied buildings and your obligations ensuring the safety and security of the property. Whilst some insurance providers have relaxed these in light of the pandemic, you should always refer to your policy wording for the exact requirements defined by your insurer to ensure that you are not in breach of your insurance cover.

From a tenant’s perspective, some commercial leases also carry a clause where if your premises are unoccupied or unused for a period of time, your landlord (and often their insurers) must be informed. If you have been forced to close under the current restrictions should check the obligations of your lease as non-compliance gives rise to a number of liabilities to the tenant and remedies for the landlord.

Change of Use Considerations

‘Change of use’ should also be considered in line with the current business activities, for example businesses that are currently operating restaurants as a takeaway service, and as mentioned above, those that are offering their premises to be used as a COVID-19 vaccination site.  Insurers are likely to regard this as a change of use, especially where the use brings additional risks with increased footfall on the premises, or a significant change to the current business activities.

When a change of use occurs, landlords and commercial property owners risk leaving themselves uninsured or facing higher insurance premiums. If a tenant uses a property for a non-permitted use and an insurer withholds a pay-out as a consequence, the tenant will be liable to the landlord for all its losses suffered as a result.

Therefore, if you are thinking about changing the use of your premises you should check your insurance policy to see if you are required to inform your insurer. In addition, if you are a leaseholder, you should also review your lease to check whether the change of use requires the landlord’s consent.

With any commercial property, whether a landlord or tenant it’s important to understand your legal position with regards to insurance and change of use, and your commercial property in general.  Contact a member of our commercial property team today for a no obligation discussion on 0845 287 0939 or submit your enquiry online.