Converting buildings for commercial use
Having a diversified income stream is a vital way for many farming businesses to ensure a positive cashflow and to weather any storms such as reduced yields or changes in markets. One way that some farming businesses are diversifying is by converting old farm buildings, which are no longer suitable for agricultural use, to office, retail or commercial units. However, as with most things, there are insurance implications and different aspects of cover to consider.
Building type and construction
Wooden structures, flat roofs, asbestos… these are all factors which may impact your insurance. It is wise to have the conversation with your broker before starting the conversion as they will be able to advise you of which insurance hurdles you may have to overcome due to the construction of the building you are planning to convert
Some underwriters are wary of specific types of insulation, such as composite panels, due to their flammability. There are too many different types of insulation to list here, but your broker will be able to advise.
Electrical Inspections and Heating
Most outbuildings are insured as unheated buildings. If you are including heating as part of your conversion, it is important to consider which types are suitable. Underwriters are wary of mobile heating units and wood burners or boilers must be professionally installed and maintained.
Rented properties must have an electrical test every 5 years and in-between tenants.
Property Owners’ Liability Insurance
Property Owner’s Liability Insurance protects landlords and property owners in the event that a tenant or other member of the public attempts to sue you should an accident occur on your property. You are liable here, as ultimately it’s the landlord’s responsibility to ensure that the property is adequately maintained.
This is potentially the most important element of a landlord’s insurance and your broker will be able to advise you on the amount of cover they would recommend.
Building and Tenants Insurance
The buildings insurance part of your policy will cover the cost of repairing or rebuilding your property in the event of unforeseen damage.
It’s important to ensure that the rebuild cost of your building after conversion is updated on your insurance policy, so make sure you inform your broker. If it’s not valued for what it would cost to return it to its converted state, you could be left short in the event of a claim.
It is also a good idea to check that your tenants have tenants insurance to provide cover for their contents. If, for example, a tenant leaves a battery charging and it catches fire, your insurer may look to seek compensation from the tenant’s insurer, so it’s wise to check that they have one!
Loss of Rent Cover
Landlords’ insurance often includes Loss of Rent cover. Many landlords assume that this will cover voids in rental income, but this is not the case. In order to make a claim for loss of rent, an insured peril must have occurred. These insured perils will be listed as part of your policy, but typically include fire, theft, storm, flood, impact and vandalism.
In the event that one of these events occurs and it takes, for example, 4 months for the property to be reinstated to use, a claim for loss of rent for that 4 month period can be made.
Type of Tenant
The type of tenant will also have an impact on your insurance and your broker needs to be informed of this. A commercial property insurer will look at the uses of the building and adjust cover to match the risk that your tenants pose to your building. A builder using your unit for storage would be considered low risk, whereas flammable items such as tyres would be higher risk.
As with most things insurance related, your broker is the best person to advise you on all aspects of insuring your converted farm buildings. Its important to remember that all Acres Insurance brokers work for their clients and not the underwriters. By starting the dialogue with them from the offset of your conversion and diversification project, they will be able to advise you on how you can keep your risk and therefore premiums to a minimum.