Question: Our building is running rough, having a damp problem and the insurance company wants us to carry out repairs before they provide insurance cover. The building is owned by a director who is self-employed and lives in the property. I deal with my directors’ personal premises. It is a large property, which we have previously used as home for a number of years.
The building is no more than 400m2 and its opening site is 230m2, with a lot of redundant areas off to the side. The directors have contracted us to do the works. But we don’t know what exactly we have to do, as the building is in a very poor state. I also have a little over 60 years’ seniority but the director is younger. What should I do?
Answer: Many businesses rent premises to themselves and own the buildings. Such setups are attractive for several reasons. The main advantage is that tenants get security of tenure and support on building maintenance. They also save the upfront cost of buying the building outright when the mortgage is paid.
But it can have serious disadvantages too. The building may be in a poor state, its other tenants may have problems and you may need to run back-up power when work on the premises begins, and there could be access problems. It might also be virtually impossible to reclaim rental costs for repairs, no matter how costly they might be.
To make matters worse, there could be difficulties when it comes to any insurance cover, which would be less than helpful if the building is badly damaged or has to be sold because of major damage.
It is possible to make changes to the building to create suitable premises for your customers in the building, but this involves considerable engineering. However, the problem usually does not appear until far into the future, and is likely to be more complicated than just fixing minor problems. If you don’t change the building, you might lose a valuable asset.