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Watts Sector Focus Bulletin - Retail

The retail sector, which employs around 10% of the UK workforce, has been characterised in recent months by the high profile failure of stores such as Habitat and TJ Hughes and the disappearance of more than 3,000 jobs. In the second quarter of 2011, 43 retailers went into administration including Jane Norman, Focus DIY and Oddbins (source: Reuters). In this climate, it is more important than ever for retail owners and occupiers to maintain a sharp focus on their property assets and to understand the cost implications of maintaining high quality space that is also energy efficient and complies with current legislation.

In this focus bulletin we look at some of the issues facing retailers in the wake of the riots in England earlier this month and offer some tips for safeguarding premises and making contingency plans for managing any future disruptions to normal trading. We also identify some of the issues surrounding break clauses in retail leases and look at the pitfalls and opportunities presented by vacant possession. We alert retail property owners and their accountants to the implications of FRS12. Finally we outline the ways in which Watts can provide help and advice to owners, investors and occupiers in order to add value to retail property.

We hope you find the following bulletin both informative and useful.

Mark Few
Watts Group PLC

Watts Sector Focus Bulletin - Retail

Take advice before you claim

The Association of British Insurers (ABI) estimates that the insurance industry will pay in excess of £200 million to customers affected by the riots across England earlier this month, and a large proportion of this will be paid to retailers.

Main Retail Aug 11

Most commercial insurance policies will cover retailers for damage to their premises, including the interruption to trading as a result of fire, looting and the other damage caused by the recent riots. Some policies will also cover those businesses which are not damaged but whose trade has been affected by the aftermath.

In order for claims to be processed quickly, retailers should contact their insurer or broker as soon as possible. Good communication is vital. Speak to your insurer before incurring any expenses relating to cleaning up, refurbishing or rebuilding your premises, otherwise they may refuse to foot the bill. Treat your insurance claim like any other project. Identify a single point of contact for your insurer to deal with and ensure that you manage the claim effectively by keeping records of all emails, phone calls and other communication. Also make sure you record exactly what information has been supplied and when. Check the small print in your policy so you know exactly what is covered and what is not, and provide as much evidence as possible of all losses incurred.

Don’t assume that damage to premises will speak for itself. Broken windows may have also caused damage to soffits or other structural elements that is not immediately apparent. If you have a ‘new for old’ policy will it cover you for ensuring your new shop front complies with the current Building Regulations? This is where it could pay dividends to take specialist advice. A professional building surveyor can survey the damage to your property and provide evidence to support your claim, helping you negotiate with the loss adjuster to achieve the best possible outcome for your business.

In our experience where businesses take professional advice, settling insurance claims is quicker and less painful than if traders go down the DIY route. Here are some simple tips from the Watts team:

  • Always get a building surveyor involved at an early stage to get best value for the claim and get what you are entitled to. Repairs can often appear superficial, so appoint a building surveyor who will know what to look for. Current Building Regulations may need work to be undertaken to a higher standard.
  • Understand the details of the extent of cover and terms of the insurance policy. Remember, you are the insured party. The role of the loss adjustor is to be impartial.
  • Gather background information and documentation, such as police reports and pictures of the damage, before any work is carried out. These will often be used to assess the claim. Good record keeping is essential, should any disputes arise.
  • Make sure all costs and scope of repairs are agreed in writing with the loss adjustor before instructing contractors to undertake any work. If not, the insurer may refuse to pay for the work and could leave you exposed.
  • Every loss adjustor has a large case load. Understand how they will prioritise their work, and the procedural aspects which you will need to follow, to avoid delays in settling the claim.
  • Be straightforward and don’t try to inflate the claim.
  • Be prepared to justify your arguments. Don’t take the loss adjustor’s opinion as gospel. Make your case and defend it. Back it up with evidence.

Finally, always co-operate with insurers and loss adjusters as this will encourage them to process your claim efficiently.

For more information, go to www.abi.org.uk or www.biba.org.uk or contact Rob Burke, Director at Watts Group, on 020 7280 8000 to speak to a chartered building surveyor.

The Watts Bulletin is the technical companion to the Watts Pocket Handbook, the essential guide to property and construction, as used by professionals since 1983.

Watts Bulletin editor: Trevor Rushton.