The month in brief
Welcome to the May issue of your Technical Update. As we go to press, the country is still partially in lockdown but restrictions are being eased and the housing market is back to work.
Around the country property management firms are now wondering how best to get their staff safely back into the office and, perhaps for the first time, are wondering whether smaller rather than larger premises may be a future requirement as many of us grow accustomed to spending more time working from home.
In this issue we focus on some of the big questions facing our profession now. We flag up the latest government guidance on workplace safety and social distancing. Our Talking points this month consider the changes to the way offices might be run for the foreseeable future and take a closer look at business interruption insurance. Our Topic of the Month asks leading property managers for their view on the post-pandemic outlook for the build-to-rent sector.
In other news, the Government has announced its new £1bn cladding fund, and we highlight the importance of good health and safety practices for blocks with communal pools and water features.
Our new LinkedIn Forum has posed some interesting questions in the last few weeks and given us food for thought around issues such as EWS1 forms, noise complaints and what to do about rogue leaseholders who decide to flout the lockdown restrictions. We report on all this and more in this issue, so if you have a comment or an opinion to share, why not join the IRPM LinkedIn Forum and let us and your fellow property managers know about it. And if you have an idea for an article, please email [email protected] with title "IRPM Update Idea - FAO Marketing"
Contents
IRPM News
CEO’s column | Sign up for our new BTR course and get the early-bird discount | IRPM launches second Tech Insight white paper | Free online CPD coming soon | Let's talk about IRPM Chats
Leasehold/block management
The Road Back to Work: what does the government guidance say? | Work stopped on two thirds of cladding remediation projects | Has the deadline for cladding removal been abandoned? | Using electronic Signatures: what are the restrictions?
PRS & BTR
How to maintain social distancing in your agency | Labour proposes five-point plan to help renters
Social Housing
Planned maintenance and void work should resume, says Housing Minister
Scotland and Wales
New aid for private landlords in Scotland
Health and safety
Legionella risks during the coronavirus outbreak | Keeping workplaces COVID-secure
Fire safety
Building owners can now sign up for £1bn building safety fund | Grenfell enquiry to start again in July | Government may pay waking watch bills | Approved Document B – sprinklers and signage
Legislation
New electrical safety standards in force from July
Talking points
Why your day in the office may never be the same again | Coronavirus and the business interruption insurance debate
Topic of the month
What’s the post-pandemic outlook for BTR?
What’s new on the Resource Hub?
Coronavirus and your business plus the latest case law
Good reads
Our pick of some of this month’s interesting and informative longer reads
IRPM News
Finding our next normal
Lockdown was simple- sort of - but it's starting to look that way now as we all wrestle with the new rules, says Andrew Bulmer
#Itscomplicated. It certainly is now, as we juggle home schooling with an uncertain back-to-school and home working with an uncertain back-to-work. How do we maintain social distancing in an office, or manage trades sharing space with residents? When can we re-open a pool or gym, or a quiet residents’ lounge? Will we ever return to crowded offices even with a vaccine? It is not possible for government to give guidance on every eventuality. Instead, it’s like driving. There’s a basic set of rules (the Highway Code – 2m / PPE / tills with screens) and then it’s down to the driver to figure out the hazards as they go. Every journey is different and there is no one- size-fits-all solution.
It's the same with day-to-day property management - and the same with coming out of lockdown. Most situations have their unique problems. But that’s okay, because property managers are problem solvers, applying their knowledge within a set of parameters and rules to navigate situations correctly, safely and ethically. We can do this, but we need to understand the rules and then assess carefully each move we make to stay safe. We are sending out Covid bulletins with all the latest need-to-knows.
Take lifts, for example. Can you run a lift outside of LOLER and should you if you can? Will you be insured? Why is the backlog of inspections getting worse? How can you get your lift inspected during Covid? We had a great IRPM Chats discussion with the Chief Engineer of Zurich Engineering. The rich seam of content overran the 15 minutes but settle down with a nice cup of tea and a biscuit for everything you need to know about lifts and Victorian boiler explosions!
Government has just published its prospectus for the £1bn non-ACM cladding remediation fund. You will need to register fast. IRPM is asking Government to prioritise how the funding will be allocated but my hint to you is, without such prioritisation get in quickly, as £1bn won’t be enough.
The EWS1 form is giving grief all over the country, as valuers ask lenders to get a completed form for buildings below 18m as well as above. We've seen some bizarre examples of seemingly unnecessary EWS1 requests on the LinkedIn members-only forum. We are taking this up with government and working with the likes of ARMA and others to try and ease the situation, but the uncomfortable truth is that there are too few fire engineers with too little PI insurance for too many buildings. This backlog is now reaching crisis point as lifting lockdown is restarting property sales. We are saying government needs to step in to help.
Our new Level 2 Foundation Course in Build to Rent is a ground-breaker. Aligned to the soon-to-be-announced revised Leasehold Foundation Course, the Build to Rent pathway focusses on the customer, on safety and on ethical behaviours as well as core technical knowledge. These are the IRPM 4 Elements of professionalism, adopted by Lord Best in his RoPA report to government. If you are interested in build to rent, see below - the introductory offer is still on.
Finally, as ever, stay safe.
Andrew Bulmer is CEO of the IRPM
Sign up for our new BTR course and get early-bird discount
The IRPM is offering an early bird discount for our new Level 2 course in build to rent management, announced in last month's issue. So sign up before 4 September to take advantage of the exceptionally low price of only £149 to take the course and the exam.
Build to Rent is one of the fastest growing property sectors and in response to the government’s increasing interest in mandatory qualifications for property agents; we are offering an introductory Level 2 course in Build to Rent management. This is an online self-study course developed around IRPM’s ‘4 Elements’ of residential property management: Technical, Health and Safety, Customer and Consumer and Ethics and Behaviours.
The course is ideal for candidates wanting to gain basic knowledge in the key areas related to BTR property management. It’s ideally suited to on-site and office-based support teams, new entrants to the profession and those already working in a property management role.
The Syllabus includes:
- An Introduction to Build to Rent Property Management
- An Introduction to the Legal Framework in Build to Rent Property Management
- An Introduction to Health and Safety in Property Management
- An Introduction to the Customer & Consumer in Property Management
- An Introduction to Ethics and Behaviours in Property Management
Learners who successfully complete the course and pass the final exam, will be entitled to entry to study toward their Level 3 Associate qualification. The skills and knowledge developed in this course can be used for progressing on to the IRPM’s Level 4 Build to Rent qualification.
IRPM launches second Tech Insight white paper
The IRPM has now published the second part of its 2020 Tech Insight programme. Making the right connections: the impact of technology on building management is a white paper highlighting the key issues raised by the impact of technology on the way our buildings are built and managed.
In the last decade we have seen a revolution in technology; in particular the way in which data influences our daily lives. It is increasingly being used by stakeholders across the property sector to inform decision-making and digitise both information flow and transactional business.
From building management systems to resident portals and from repair reporting to the internet of things, there is a myriad of ways in which technology can be used to improve the pace and quality of service delivery.
The IRPM brought together a group of leading industry experts to discuss the impact of data and advances in building technology on the management of residential blocks. The white paper captures this conversation, highlighting the technological challenges for the sector and sets out next steps for the property management profession.
Launching the White Paper, IRPM CEO Andrew Bulmer said: “These discussions and white papers are pivotal to start the conversation around the ways in which technology is already impacting our residential buildings and will change the way they are built and managed in the years to come.”
Copies of the white paper can be downloaded here.
Free Online CPD coming soon
The IRPM is launching a new online CPD library which will be free of charge for members and easy to access via the IRPM Learning Hub The aim is to provide professional managing agents with a simple CPD offer that will provide accessible online training and will support any new license to operate that emerges as a result of the government’s property agent reforms. The launch and details of how to access IRPM’s new online learnings will be announced during June.
Let’s talk about IRPM Chats
This month, we started a series of online IRPM Chats. Leading experts in various aspects of the property industry will be looking in detail at topics of interest to property managers and we will be flagging them up via your email inbox.
Our first chat was with Danielle Parker of Inspired Property Management and Cassandra Zanelli of PM Legal, about customers, communication and credit control during Covid-19. The focus was around keeping all estates afloat, how to manage service charges and arrears during Covid-19, with a particular focus on how to communicate with customers as well as ensuring all legal requirements are adhered to and what actions can be taken in such a time.
The second Chat was with Dominic Dawson, Chief Engineer at Zurich Engineering, to tackle LOLER and some of the other big lift questions out there. Look out for more as the weeks go by and let us have your feedback to tell us what you like and what you don’t!
Leasehold/block management
The Road Back to Work: what does the government guidance say?
As lockdown restrictions are gradually eased, property management firms are starting to bring staff back into the workplace after two months of working from home. Not all will come back immediately and some may opt to work remotely on a permanent basis.
The Government has launched new guidance on the safe use of offices as part of its road map for the return to work, primarily aimed at employers. Law firm CMS has produced a real estate Q&A on the guidance with particular emphasis on the issues for landlords but some aspects may also be helpful for anyone responsible for the safe operation of a property management business. Here's what they have to say.
Is compliance with the guidance mandatory?
No. However, it encourages landlords to work collaboratively with tenants in multi-tenanted sites/buildings to ensure the safety of building users – particularly in common areas (entrances, lifts, receptions). Thought should also be had to your employees, agency workers and contractors who may be operating from the premises and measures that should be put in place to best ensure their safety.
What are the practical implications of the guidance?
The guidance recommends that employers take a number of steps in relation to common areas, for example:
- Staggered arrival and exit times;
- Additional car parking/bike facilities;
- The use of additional entry points (including fire exits) which may require additional security;
- Regulating the use of communal changing/locker rooms – the use of which is likely to increase with higher numbers commuting by foot or cycling;
- Floor markings and one-way walking systems in ‘high traffic’ areas such as receptions;
- Servicing or adjusting ventilation systems so that they do not automatically reduce based on lower than average occupancy – maximum ventilation levels are recommended, where possible;
- Increased frequency of cleaning of common areas;
- The use of paper hand towels in place of hand driers in bathrooms;
- Reduced maximum lift capacity; and
- Widespread availability of hand washing facilities/sanitisers in common areas.
Click here to download the guidance in full.
Work stopped on two thirds of cladding remediation projects
Building magazine reported in May that work has stopped on more than two thirds of the buildings where the remediation of ACM cladding is required.
According to the housing ministry's April building safety update, work was paused on 68% of projects at some point during April. Of the 97 projects where an update was received, works were paused at 52 sites. Of the 45 projects where work was continuing at the end of last month, 14 had restarted after an initial pause in works.
The update also revealed that there are 149 high-rise residential and publicly owned buildings in England that have completed remediation works to remove and replace ACM cladding systems. This is an increase of five since the end of March.
Download the full report here.
Has the deadline for cladding removal been abandoned?
Perhaps unsurprisingly, the Government appears to have backed away from its target date for replacing Grenfell-style cladding.
In July 2019, then-communities secretary James Brokenshire said he expected all cladding remediation to be finished by June this year. However, when asked by Inside Housing whether it still intended to meet the deadline, an MHCLG spokesperson said: “Building owners are responsible for making their buildings safe. Remediation work takes time and must be done safely and properly. How long it takes varies according to the individual building, depending on the type and extent of the work required.”
When the target was set last year, there were 327 tall buildings with an aluminium composite material (ACM) cladding system considered to be dangerous that still required remediation. There were 102 buildings in the social housing sector, 163 buildings in the private sector, 26 student towers, 29 hotels, and seven publicly owned buildings.
But the most up-to-date figures showed that by the end of April, 307 towers were still awaiting the completion of remediation work – just 20 fewer than the figure when Mr Brokenshire made his pledge. A total of 42 buildings have completed during the year, but more have been discovered, largely in the private sector.
This leaves 180 private buildings still awaiting the completion of works. Only 25 buildings of 92 that have submitted an application to the government’s cladding remediation fund have so far been approved.
Using electronic Signatures: what are the restrictions?
The impact of COVID-19 on property managers means that electronic signatures are being used more than ever before. For many in the property industry, the use of electronic signatures is unfamiliar ground – a practice often discussed but never used. Yet, where they are capable of being used, they can be very useful particularly where signatories are working from home or are unable to have documents couriered to or collected from them.
However, despite the benefits and the possible necessity to use electronic signatures, most countries carry some some restrictions and limitations that, for now at least, prevent the use of electronic signatures being used for all real estate documents. To help clarify the situation, law firm CMS has summarised the current position on the validity and use of electronic signatures for real estate documents across various European jurisdictions. To find out more click here.
PRS & BTR
How to maintain social distancing in your agency
A helpful article on the Goodlord website offers some good advice on the social distancing measures we are all now having to adopt for the foreseeable future.
These are useful for anyone working in an office environment but are particularly aimed at customer-facing agency staff.
We must all maintain social distancing in the workplace wherever possible and this will involve making changes to every aspect of you and your staff’s working day. Goodlord focuses on the steps you will need to take to maintain social distance in a range of different situations. These include:
- Social distancing when arriving, leaving, and moving around the workplace
- Social distancing when working at a desk
- Social distancing in meetings
- Social distancing at break times
- Social distancing during customer interactions
Read the article in full here.
Labour proposes five-point plan to help renters
The Labour party has published a five-point plan to prevent renters from being evicted during the coronavirus crisis (source: LocalGov.co.uk).
The party has warned that government measures to protect tenants during the Covid-19 outbreak fall “well short” of protecting people from homelessness.
Labours proposals are to:
- Extend the temporary ban on evictions for six months or however long is needed to implement the legal changes below.
- Give residential tenants the same protections as commercial tenants, by protecting them from being made bankrupt by their landlords for non-payment of rent.
- Bring forward the government’s proposal to scrap Section 21 ‘no-fault’ evictions and outlaw evictions on the grounds of rent arrears if the arrears were accrued because of hardship caused by the coronavirus crisis.
- Once evictions are prevented, grant renters at least two years to pay back any arrears accrued during this period.
- Speed up and improve the provision of Universal Credit, as Labour recently called for, and consider a temporary increase to the Local Housing Allowance to help prevent risk of homelessness.
Thangam Debbonaire, Labour’s shadow housing secretary, said: “Current protections for people renting their homes are woefully inadequate. Unless the Government acts now, many thousands of tenants will be at risk of losing their homes.
“The Government has paused evictions for three months and answered Labour’s call to increase the Local Housing Allowance. Both are welcome, but do not go far enough. It will take time for people to recover from this crisis and they need all the support we can give them to prevent what would be an unprecedented and devastating spike in homelessness.”
Social Housing
Planned maintenance and void work should resume says Housing Minister
In May, Housing Minister Christopher Pincher told social housing landlords to resume planned external maintenance and repairs on their empty properties (source: Inside Housing).
In a letter written to all social housing tenants Mr Pincher wrote: “We are expecting many landlords to resume external planned maintenance works and services. Internal planned maintenance will only take place in homes where residents are not shielding or self-isolating. Your landlord may also carry out maintenance and repairs in empty properties, so that they can be re-let to new tenants.”
The update follows government guidance published in March urging private and social landlords and tenants to take a “pragmatic, common sense approach to non-urgent issues”. This advice led to most social landlords switching to emergency repairs only, with many forecasting a massive backlog of repairs.
Mr Pincher’s letter said: “As we start to ease lockdown measures, landlords should be able to carry out routine as well as essential repairs for most households. There will be a backlog of repairs that they will need to address, so it may take longer than normal to carry out more non-essential work.”
Scotland and Wales
New aid for private landlords in Scotland
The Scottish Government has announced a £5 million fund to offer interest-free loans to landlords whose tenants are having difficulty paying rent during the coronavirus (COVID-19) crisis.
The Private Rent Sector Landlord COVID-19 Loan Scheme will offer eligible landlords up to 100% of lost rental income for a single property. It will support private-sector landlords who are not classified as businesses, have five or less properties to rent and have lost rental income due to tenants unable to pay rent as a result of the COVID-19 pandemic.
Housing Minister Kevin Stewart said: “We want to ensure no one loses their home during this unprecedented public health pandemic which is why we passed legislation to protect tenants against any eviction action for six months. This new £5 million loan fund builds on that action and offers landlords the same security as tenants, ensuring they have financial support if tenants struggle to pay rent because of coronavirus. While all tenants should pay their rent if they can, we recognise the financial pressure people are facing. The Scottish Government encourages landlords to talk to their tenants about rent payment issues. We also expect landlords to be as flexible as possible with their tenants, discuss managing rental payments and help them find sources of financial support and advice.”
Health and safety
Legionella risks during the coronavirus outbreak
Employers, the self-employed and people in control of premises, such as property managers and landlords, have a duty to identify and control risks associated with legionella.
If a building you manage (or work in) is partially closed or has had reduced occupancy during the coronavirus (COVID-19) outbreak, water system stagnation can occur due to lack of use, increasing the risks of Legionnaires’ disease.
This is particularly important in buildings with swimming pools, communal showers or water features such as fountains that may now be off limits and/or switched off.
You should review your risk assessment and manage the legionella risks to protect people when the water system is reinstated or returned to use. If the water system is still used regularly, it is important to understand and maintain the appropriate measures to prevent legionella growth.
You can find out what Legionnaires’ disease is, where it comes from, how people get it and symptoms and treatment by reading the HSE guidance What is Legionnaires' disease?
Keeping workplaces COVID-secure
The HSE has provided a range of guidance that could help you keep your workplace safe (COVID-secure). Working safely during the Coronavirus outbreak includes practical measures to help you manage the risk presented by potential infection. There are two downloadable guides designed to help you keep your staff and colleagues safe while running your business:
- a short guide on how to do a COVID risk assessment and manage the risk in your workplace. This includes taking measures to work at home where possible, maintaining social distancing, cleaning and hygiene
- a guide on talking with your workers about making your workplace COVID-secure and involving them in the steps you are taking to protect them and others
Further detailed
Fire safety
Building owners can now sign up for £1bn building safety fund
Building owners have been urged to act fast and put the safety of residents first as the government’s £1 billion Building Safety Fund to remove dangerous cladding, as announced in the Spring budget, was formally launched today by Housing Secretary Robert Jenrick MP.
On 26 May the Government published the prospectus for the fund which aims to meet the cost for remediation of unsafe non-ACM cladding systems on residential buildings in the private and social sector that are 18 metres and over and do not comply with building regulations.
Building owners, freeholders or others responsible for the building are being urged to register for the fund from 1 June, as applications can be progressed alongside the development of the remediation project.
The Housing Secretary Robert Jennrick, regional mayors and local leaders have pledged to ensure vital building safety improvements continue during the coronavirus pandemic.
The fund is targeted at leaseholders in the private sector who are facing significant costs for remediation of their blocks’ cladding systems. However, the government will also provide funding to social housing providers where the costs would otherwise have been borne by leaseholders.
The fund will not apply to buildings under 18 metres in height or other non-residential buildings, such as hotels, hospitals and buildings where there are no residential leaseholders. However, the registration form also asks about insulation and fire risks such as a lack of firestopping, and if warranties are in force.
The government is already providing £600 million (£400m to the social sector and £200m for the private sector) for the replacement of ACM cladding systems bringing total funding for remediation up to £1.6 billion.
Grenfell enquiry to start again in July
According to Building magazine, the Grenfell Inquiry has announced it is to resume hearing evidence – with physical hearings rather than by video conferencing.
The sessions won’t start until July at the earliest, after the third anniversary of the fire on June 14, 2017 which claimed 72 lives. The timing will depend on a relaxation of government guidance on social distancing.
The inquiry into the tragedy was suspended in March, when the Prime Minister announced non-essential contact must be avoided because of coronavirus and that the over-70s should isolate - a category that includes inquiry chairman Michael Moore-Bick and barrister Michael Mansfield.
Government may pay waking watch bills
High rise blocks paying for a waking watch while they wait for their cladding to be replaced, may get government help with the costs (source: Inside Housing).
Replying to a question from shadow housing minister Mike Amesbury in the House of Commons in April, Communities Secretary Robert Jenrick said: “I have asked… the new Minister with responsibility for building safety, to look into this to see what we can do to reduce the cost of waking watch for members of the public in this position, and to ensure that waking watches, where they are required, can continue despite the lockdown.”
This is the first indication that government money might pay for waking watch, which has already cost leaseholders hundreds of thousands of pounds. It is encouraging news for flat owners who have received no government assistance, such as those living in blocks that are less than 18 metres high or where leaseholders are now facing huge hikes in insurance costs.
Leaseholders at the Paddington Walk development in central London have already paid £700,000 for waking watch, according to Inside Housing. And at Northpoint, a site of only 49 flats, leaseholders collectively are paying £11,000 a month.
Approved Document B – sprinklers and signage
The government has published an amendment to the statutory guidance to the building safety regulations – otherwise known as Approved Document B. These changes will ensure sprinkler systems and consistent wayfinding signage are mandatory in all new high-rise blocks over 11 metres tall when they come into force.
Legislation
New electrical safety standards in force from July
The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 come into effect for all new tenancies in England from 1 July 2020 or from 1 April 2021 for existing tenancies.
The new regulations will mean that landlords must ensure every fixed electrical installation is inspected and tested at least every five years by a qualified person. The regulations also state that a landlord is required to obtain a report of the results of the inspection and test, supply it to each tenant within 28 days and retain a copy until the next inspection is due.
The National Association of Professional Inspectors and Testers (NAPIT) has published guidance on the new regulations plus a dedicated online search facility on its website at www.napit.org.uk helping landlords search for electrical inspectors. NAPIT has also produced a new Landlord Electrical Installation Safety Record for its members to use which provides a summary of the often lengthy Electrical Installation Condition Report for landlords.
For a detailed breakdown of the new regulations and for more information on compliance during the lockdown, click here.
Talking points
Why your day in the office may never be the same again…
The office of the future could be very different to the traditional workplace, according to consultant D2E. Here’s why…
Lasting change is coming to Britain’s office sector in the wake of the COVID-19 outbreak according to Mark Fairweather, managing director of D2E. The consultancy’s predictions follow research among lockdown homeworkers and the commercial property sector.
Both studies reveal striking levels of changing sentiment towards going to work in an office - and both highlight common areas of concern that lie behind those feelings. According to Mark: “If the results of our indicative surveys are anything to go by, we are seeing a paradigm shift in the workplace, working practices and commuting habits.”
Among the key conclusions from its homeworker study, D2E reports that:
- Almost half (44%) of us now say we will be asking employers to work for at least some days of the week from home.
- Almost two-thirds (63%) of us say the greatest fear about returning to work is not so much about the office itself but about commuting on busy public transport.
- Using busy lifts is an issue for 28% of commuters.
- Current internal layouts are a worry for 30% of office workers.
- Only a third of us currently expect to return to the office full-time.
These findings were mirrored in the concerns of the decision-makers and influencers whom D2E surveyed within the property industry.
- More than three-quarters of respondents (78% ) expect office population densities to fall.
- More than half (58%) expect changes in working hours and almost as many think lifts will be one of the facilities to be most affected – with a raft of changes including increasing use of stairs, in-cab medical/sanitisation countermeasures and personal protection such as masks becoming prevalent or indeed mandatory.
Hygiene concerns outrank all others relating to lifts and escalators. The vast majority (89.1%) of the commercial property industry respondants who were polled are worried about the hygiene measures needed in lifts and lobbies whereas four fifths (80.4%) are concerned about the need for effective measures to counter the spread of disease via buttons and pushpads. Over half of respondants think lift waiting times are a key issue.
Commenting on the findings, Mark Fairweather says, “While we know many businesses and homeworkers will be asking themselves whether more homeworking is not now inevitable, we believe that office workers’ hours will be increasingly staggered to force building densities down”.
Mark believes the post-pandemic period may mark the end of the long push to cram more and more people into less and less space. “I expect the typical space allocation of 8m2 per person to go up to something like 12m2 per person on main floors, but I also think lobby and reception areas will expand, with more of a focus on stairwells and walking wherever feasible. Workers are likely to demand bike storage and shower facilities, changed canteen layouts (if these are provided at all) for social distancing, and increased natural ventilation.”
D2E also predicts an increasing swing towards touchless technology in lifts such as smartphone, voice-control or biometrically activated lift access and dispatch. Lift car sizes may expand to permit social distancing and viral resistant materials may also become the norm for interior finishes.
“For many existing owners of commercial property, however,” says Fairweather, “these changes can only be delivered slowly. What we can and should change now are the working practices which govern people flow, including building entrances, receptions, lifts and associated areas“.
D2E is a vertical transportation consultant based in London, Manchester and Nottingham
Coronavirus and the business interruption insurance debate
Susan Hopcraft takes a closer look at the ins and outs of business interruption insurance
The Government-imposed lockdown has come at a cost, with many businesses losing their entire revenue overnight due to the strict measures that have been in place since 23rd March.
Many companies, anticipating a difficult period ahead, added business interruption (BI) cover to already expensive business insurance. However, the growing number of refused claims is leading to calls for Government intervention.
What are BI policies?
Standard business interruption cover indemnifies a business for loss of income during periods when they cannot carry out business as usual due to physical damage. The insurance might compensate the business for any increased running costs and/or shortfall in profits for a set period and financial limit. Some policies have extensions that might apply to coronavirus losses, for which additional premiums will have been paid.
There are two likely clauses:
• Business Interruption (specific illnesses)
Most extensions cover specific diseases, listed in the cover. These are diseases that are well known and understood. Covid-19 will not be named as it is a new virus, and this is likely to lead insurers to deny claims. Businesses will feel aggrieved by that. Their argument will be that the clause was intended to cover disease closure and the clause could not have named a disease that did not exist. However, some disease extensions are more general and do not specify certain diseases. In these cases, business interruption cover for Covid-19 is more likely to apply.
• Business Interruption (non-damage denial of access)
Another relevant extension is cover for losses because of people not being able to access the premises due to specific circumstances. This would normally cover situations such as the police cordoning off an area due to an event such as terrorism. The clause might cover inability to trade due to a government restriction, which is what has happened with schools and bars/restaurants directed by the government to close prior to a full lockdown.
Another issue arising out of businesses being temporarily closed is the need to let your insurer know if the insured premises are unoccupied. There may be a clause in your property insurance that requires the premises to be occupied. The Association of British Insurers (ABI) has suggested that insurers will be more flexible on this under the current circumstances.
Protecting your business
There are a lot of businesses that feel cheated by the decision to deny pay-outs, especially as they feel they’ve taken steps to avoid such a situation.
If your business closes or is otherwise disrupted by coronavirus, and you have business interruption insurance but the insurer has declined your claim, then don’t be afraid to take professional advice.
Susan Hopcraft is a partner in the Dispute Resolution team at Wright Hassall.
Topic of the month
What’s the post-pandemic outlook for BTR?
What are the prospects for a sector based on communal living at a time of social distancing? We asked property management experts for their views on the way in which BTR operators are coping with the pandemic and get their predictions for the future.
The latest figures from the British Property Federation (BPF) paint a rosy picture of the build-to-rent sector, with a 12% increase in the number of BTR homes either planned, under construction, or completed in the last 12 months. That’s expected to translate into more than 150,000 additional flats coming onto the market. Outside London, the future looks even brighter, with a 58% hike in units since this time last year.
Positive investor sentiment
It is too early for those figures to reveal the impact of Coronavirus on the sector’s housing pipeline but the BPF’s head of policy, Ian Fletcher, sounds an optimistic note, saying the sector remains attractive to investors.
Dave Butler, CEO of the UK Apartment Association (UKAA) agrees. “From what we see and hear from our members, investor sentiment towards Build To Rent is very positive, indeed there are suggestions that there is increased investor interest – the sector has strong defensive qualities, there is an excess of demand over supply and people still need somewhere to live” he says.
From the development perspective, Dave explains that BTR is attractive because the absorption rate is so much greater than build to sell, which is particularly important in a generally depressed economy. “The evidence from history in the US is that the multifamily sector has come out of past crises stronger and we are confident that this will be true this time around in the UK,” he explains.
Jacqui Daly from Savills residential research, which produces the BTR figures for the BPF, told Show House magazine last month that once the country is out of lockdown, build-to-rent developers should be confident to progress stalled developments and Dave confirms that this is now starting to be seen on the ground. “Projects that were on site had mostly closed but are now reopened working under PHE guidelines,” he says. However, he warns that the new government guidelines for safe working together with supply chain disruption mean that progress in the near future is difficult to predict.
How are operator’s margins affected?
He also thinks it’s too early to make meaningful predictions on operators’ margins. “On the income side, rent collections are holding up well so far, though this may change over the coming months. On the costs side the changes required to ensure resident and staff safety will increase costs in the short term.,” he says.
Property managers working in the sector confirm Dave’s comments about rent collection. Outside London, Sam Hay, managing director of Manchester-based agency Life by Ringley, specialises in BTR rentals. She supports the view that the sector is faring better than expected, saying: “Perhaps surprisingly, with so many people furloughed, rent arrears have not been a major issue to-date”.
Tracey Hartley, co-chair of the education and policy committee of the UKAA agrees that arrears, to-date, have only been a problem for around 1-2% of tenants. “There was a spate of quite opportunistic approaches at the beginning of lockdown but where there is genuine hardship landlords can usually come to an arrangement,” she says.
Day-to-day issues
So what are the day-to-day issues being faced during lockdown by block managers? With so many of us now spending more time at home, Tracey has noted a shift in customer expectations and requirements. ”Now people are at home 24/7, they are flagging up all the little repair issues they hadn’t noticed before!“ she says.
The biggest potential problem for Sam Hay, is how to safely maintain social distance in build to rent blocks. This is being carefully managed, with communal areas such as gyms, roof gardens and swimming pools currently closed to residents, she says.
Tracey Hartley reports that all the major BTR operators have closed their communal areas with lounges and terraces out-of-bounds for the foreseeable future. She says there has been a mixed response to this from residents – with some asking for rent reductions as a result - but in the main block managers are working hard to come up with initiatives to keep people happy and engaged with their community.
Lee Richards, director of build-to-rent at FirstPort says that social distancing and the safety of residents, colleagues, contractors and visitors is his managers’ number one priority. “One-way systems, distance markings, vapour shields, and suitable protective equipment are all being used and adapted to the requirements of specific developments, allowing essential workers to carry out their roles safely, he says.”
It might be expected that all these measures would have a negative impact on resident experience in a sector which relies heavily on community engagement. However, Lee points out that the appeal of communal living is not just physical proximity to others. “In fact,” he says “in many developments we’ve seen the lockdown have a positive effect on communities and bring people together – most residents are keen to keep socially connected even when they’re physically apart”.
Harnessing technology
Dave Roberts draws attention to the fact that the rate of adoption of technology has been transformed by the COVID-19 crisis. He thinks there are signs that this may happen in the application of tech to building operation too. So with social distancing likely to be in place for some time in BTR developments, it is vital for property managers to make sure communities and support networks continue to prosper.
“Technology is already central to management for build-to-rent,” says Lee Richards,“Our residents are familiar with using apps and portals to manage their homes, and operators already have existing channels set up to put community engagement and communication at the heart of day-to-day life. The lockdown gives us reason to build on that”.
Future demand
In future, there will undoubtedly be challenges for a sector which is built on communal living while social distancing remains in place. But despite this ‘next normal’ Dave Roberts believes that overall, the future is bright. “Investor sentiment is positive and focused on long term steady returns rather than short term profit. On the consumer side, demand has held up well in terms of levels of enquiry” he says.
Jacqui Daley also takes a positive approach to the question of future demand. “We’d expect high levels of uncertainty to increase demand for rented accommodation as people look to avoid longer term commitments such as mortgages, or if borrowing remains more constrained. At the same time, we expect to see the leveraged buy-to-let sector remain under pressure, driving demand into build-to-rent” she says.
Lee Richards agrees. “Build-to-Rent investments are based on long-term, sustainable returns. In the current crisis this provides the sector with a degree of resilience, but no industry is entirely immune. Now more than ever the quality of the offer, location, facilities, price – and management – are key to success, particularly as new homes are released by developers to market in the coming months,” he says.
Good news for property managers
Perhaps most important for block managers, is evidence of residents’ genuine appreciation of the value of professional management during this difficult period in all our lives. This has been particularly shown in resident reviews on Homeviews which have hardly mentioned common areas and amenities. “Community means more than gyms and cinema rooms” says Dave. “Our [UKAA] members have put enormous effort into maintaining that sense of togetherness and communication that creates that shared feeling and strengthens place attraction. These factors will provide a good basis for a positive future when the world returns to normal”.
What’s new on the Resource Hub?
Running your business
HMRC is producing regular bulletins for employers on a range of issues around Covid-19. Find out more on the Resource Hub.
New HSE guidance is designed to help you work safely and control the risks associated with running your business during the pandemic
Case Law
In this recent case, the subletting of a flat via Airbnb and Booking.com constituted a breach of covenant.
Despite not being at fault himself, a leaseholder was found to be in breach of covenant when a tenant marketed his flat on Airbnb.
The Court of Appeal held that the ‘reasonable recipient test’ set down in an earlier case, applies to notices served under section 8 of the Housing Act.
Good reads
Our pick of some of this month’s interesting and informative longer reads.
From surviving to thriving: Reimagining the post-COVID-19 return
For many, the toughest leadership test is now looming: how to bring a business back in an environment where a vaccine has yet to be found and economies are still reeling. This report from McKinsey is thought provoking and well worth a few minutes of your time. Read it here.
Investor outlook: residential property in a post-Covid-19 world
Lisa Bevan at legal firm Taylor Wessing takes a look at the future for investment across the different segments of the residential property market post-lockdown. Read it here.
