empty property: protect and survive Experts practical advice on safeguarding your investments from squatters and damage

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1 empty property: protect and survive IN ASSOCIATION WITH aviva Experts practical advice on safeguarding your investments from squatters and damage

2 a forum hosted by OUR PANEL of experts Peter CourtEnAy is risk consulting adviser at Marsh colin davison is corporate account manager at SitexOrbis matthew gordon is underwriting manager at Aviva asking the questions simon martell is business manager at Aviva Allister smith is property risk manager at Aviva richard heap is Property Week s professional editor ABOUT this forum This forum was hosted by Aviva at its office at Fenchurch Street, London EC3M 3LA. If you are interested in hosting or participating in future events, please contact Niki Kyriacou, global client solutions manager, at Property Week, Ludgate House, 245 Blackfriars Road, London SE1 9UY. Tel: niki.kyriacou@ubm.com

3 five ways to keep squatters at bay Squatting is a problem that affects all types of property owners. Squatters can use unlet shops to sell knock-off gifts in the run-up to Christmas, while groups of travellers occupy warehouses to protect their caravans from bad winter weather. Even homes in London s Mayfair are not exempt, although the squatters there call themselves artists. The economic downturn has exacerbated the problem and put owners at more risk. In September, research firm the Local Data Company estimated that one in eight UK shops almost 117,000 is vacant, and the Empty Homes Agency estimates 764,000 homes are empty in the UK. And while tenant demand remains weak, the office and industrial sectors are also at risk. Where there are empty properties, squatters soon follow, especially if appropriate measures are not taken to improve security and protection. October s Comprehensive Spending Review is unlikely to help matters. Large cuts to public sector budgets mean public sector bodies will have to leave buildings they occupy and spend more on security to prevent squatters moving into them. The large cuts to their budgets mean that in many cases this will not be possible. However, the government is planning to target squatters with new legislation. The Ministry of Justice last month announced that it intended to make squatting a criminal offence in England like it is in Scotland. The government has also published a guide giving advice to owners of commercial There are larger numbers of properties left to rot Simon Martell, business manager, Aviva and residential properties to keep squatters out. Simon Martell, business manager for insurer Aviva s national and European property owners insurance team, says squatting has become more prevalent. There are larger numbers of properties left to rot, he says. We re faced with situations where the property owners don t have the finances or the ability to put money into developing, renovating or speculative lets. They won t commit money if they think they are more likely to get better investment returns elsewhere. Aviva has seen claims for the eviction of squatters double in the last year. In some cases, claims are for more than 1m because it is not just costly to remove the squatters. They can also cause fires, either on purpose or by rewiring the electrics, and water damage if they have removed pipes, in addition to other harm to the property. There are knock-on effects, too. If it takes three months to evict squatters and often longer using the county court system that is three months that the owner cannot let the property, and so lose out on rent. In some cases, owners have agreed deals to sell buildings, only for squatters to move in and the deal to collapse. Worse, if an owner follows the correct procedure, when it comes to claiming on its insurance for damage to its property, it may find an insurer unwilling to pay out or only prepared to pay a much lower amount than the value of the damage.

4 85%-90% of the time, the landlord has advance notice of the property becoming unoccupied. An opportunity needs to be taken then to assess the risk of attack Peter Courtenay, risk consulting adviser, Marsh Simon Martell, business manager, Aviva Peter Courtenay, risk consulting adviser, Marsh «Aviva gathered a group of industry experts for a roundtable discussion that set out the most important steps for a landlord to keep squatters out, or get them out once they re in. Their advice can be broken down into five main points. 1 Tell your insurer When you know that a property is becoming empty, you need to tell your insurer, because if you don t, this puts you in breach of your change of occupancy clause. Martell says property owners should be aware of the terms of their insurance, and that brokers should make sure they explain to owners exactly what they are buying. Peter Courtenay, risk consulting adviser at insurance broker Marsh, says that property owners can become unstuck if a tenant on a long-term lease moves out of a building but does not tell the owner the building is becoming empty. They have broken a lease condition, and the landlord is not in compliance with the insurance conditions but the landlord is still liable. It s something that landlords need to remind their tenants about on a regular basis, says Courtenay. 2 Do the simple things When a property becomes empty, the property owner should carry out a comprehensive risk assessment, which should also include the risk of the property from squatters or criminals. They should check for risks from fire and water damage, such as through freezing pipes as the seasons change. Courtenay says this frequently doesn t happen: I would say 85%-90% of the time, the landlord has advance notice of the If they break in and injure themselves, they can still sue for any injury or damage that has been caused to them Colin Davison, corporate account manager, SitexOrbis property becoming unoccupied. An opportunity needs to be taken then to assess the risk of attack and to manage that risk. He says that one of the simplest steps is to turn off the water supply at the main stop valve, as this can stop extensive damage to the property if criminals break in and steal copper piping. There have been numerous claims of water damage occurring over the period of a week because no one s gone in to check, therefore water has just kept pouring out, says Courtenay. Turning off the electricity can also help to reduce the risk of fire, and of criminals injuring themselves if they tamper with the electrics for example, to install improvised heating. Property owners may not care what could happen if a criminal breaks into their building: after all, they shouldn t be in there in the first place. However, the Property Owners Liability Act puts an obligation on the person in control of the premises to make sure they are safe for anyone that goes into them. Aviva s Martell agrees: There will be a duty of care to anybody on the property, whether they re on there legally or illegally. If somebody injures themselves on the property, this can expose the property owner to claims by ambulancechasing law firms. Colin Davison, corporate account manager, SitexOrbis, which manages empty properties on behalf of owners, says that owners can protect themselves if they can show that they have taken precautions to stop people getting into the building. The law changed 18 months ago, so the onus is more on the property owner in the case of a break-in to show they ve taken reasonable precautions to stop people trespassing. If they

5 Colin davison, corporate account manager, SitexOrbis break in and injure themselves, they can still sue for any injury or damage that has been caused to them, says Davison. He adds that when owners assess the risk of squatters and vandals, they should realise that different parts of buildings can be exposed to different risks. A lot of it is common sense, he says. A property in a poorly lit area will be at more risk than one in a well-lit area, for example. He adds that squatting is a bigger problem in the south-east than other areas of the country because of the higher cost of living, even though there are more empty properties in other parts of the country. There are some steps a landlord can take to help reduce the risk of attack. The main one is to remove signs that the property is not occupied. If the property has a glass front door, then a large pile of post behind the door is a clear sign that nobody has been in and checked the property for a while. It is also a fire risk. We d always recommend sealing up letterboxes, says Davison. If there s lots of post, and someone sets fire to something and puts it through, then it doesn t take long for the flames to spread and the whole property can be burnt down. He says that owners of properties with grass outside should make an effort to cut it, because long Squatters rites: once in occupations, intruders can be difficult and costly to remove

6 grass is another sign that a property is unoccupied. Taking action to clean up graffiti, fly-tipping and other signs of disuse are important too. These are the simple steps an owner can take, but they will want to look at security as well. Marsh s Courtenay adds that short-term letting of a property at a reduced rental, such as for seasonal use at Christmas, is another of option to avoid unoccupancy. Even letting to a charity for fundraising may cover outgoing council taxes, ensure attention to security and monitor general condition. 3 Install the right security No property owner wants their high street shop or glassfronted office block to look like a maximum security prison. But there are a couple of measures that are not punitively expensive and also make it easier to guard against squatters. Allister Smith, property risk manager at Aviva, says it is worth owners making the effort to make sure they get it right. If the owner can put that building to sleep right first time and maintain regular site inspections, it makes a big difference to the way that building remains protected. You can pick up the telltale signs of decay at an early stage and take remedial action to protect against those larger intrusions or events, he says. Davison from SitexOrbis says that the most important piece of security is a wireless temporary alarm with a video feed. The camera is activated when a break-in occurs, and then the pictures of the break-in are sent back to a SitexOrbis alarm-receiving centre. Somebody at the centre can then call the police to report the break-in as it happens. He says that to prevent squatting, catching this initial break-in is more important than catching the squatters themselves. This comes down to an important legal principle. That principle is this. Squatting is not a crime in England and Wales, so the police have limited powers to get involved. As such, it is dealt with as a civil matter rather than a criminal matter. This means that the police in England and Wales avoid cases involving squatters because they are worried about exceeding their powers. Police will intervene if there is a break-in, though, as that is a criminal matter. If a property owner wants to get police support then they need to focus on this break-in. Squatters are aware of this principle because advice for squatters about their legal rights is disseminated through the internet. Therefore, squatters will send one person to carry out the initial break-in. Once the property has been broken into and is easily accessible to squatters, then the person who did the break-in will leave the site. Shortly afterwards, the group of squatters will turn up. Legally they are allowed to access the property if they do not cause criminal damage in the process, and once they have done that then they can exercise their squatters rights. That is why a quick police response to the initial break-in and being able to provide video evidence of the crime is important. Allister Smith, property risk manager, Aviva matthew gordon, underwriting manager, Aviva An alarm system and the surveillance along with it can be cheaper than routine visits by a guarding company Peter Courtenay, risk consulting adviser, Marsh

7 If the owner can put that building to sleep right first time and maintain regular site inspections, it makes a big difference to the way that building remains protected Allister Smith, property risk manager at Aviva We will pick up the phone to the police in that area and say there is a break-in and that they should go there straight away. That is a far more effective way of dealing with squatters and travellers: that helps the property owners, the insurance companies and others to see a live recording of somebody physically breaking in, says Davison. Marsh s Courtenay adds that there is no need for an alarm system to be as sophisticated as one that complies with police policy, if the first response is to be by a guarding company. Guard attendance will filter out any false alarms and if the guard sees the criminal activity, he then calls police to come to the scene of the crime. There are certain circumstances where approaching by that route, you will get the police there quicker than if you had a police-compliant alarm system, says Courtenay. An alarm system and the surveillance along with it can be cheaper than routine visits by a guarding company. By mixing the security disciplines, by putting in a blend of the security systems that are available, you will find a system that the landlord finds cost effective. Courtenay says that these security measures do not need to be a huge cost for the owner, who might be able to do a deal with the tenant to continue with the system. He adds that when a property becomes unoccupied, there is also scope for the landlord to do a deal with the tenant to leave any of their security in place: Often the outgoing tenant will remove many of those devices, he says. It is also worth owners spending a little money upfront to prevent squatters getting in, because otherwise they may have to pay to go through the whole legal process. Any security measure does not need to make your property completely impenetrable, but does need to make the squatter think that they d rather go for an easier target. As Davison from SitexOrbis puts it: If you ve got one particular are where it s secured, they won t think, We ll take that on. They ll move to an area where it s not secured, which is an easier option for them. prevention and cure: avoid telltale signs of vacancy, such as a build-up of post, and take adequate security measures against trespassers 4 Keep tabs on the firms you use If you are employing a security guard or a managing agent to look after your building, then you need to ensure they are doing what you are paying them for. Otherwise, you are at risk that their negligence could invalidate your insurance. Owners should ensure that any guards they use are regulated by the Security Industry Authority. If the police do have to come to a property for any reason, it is much better to have a licensed security firm to deal with them than an unlicensed and potentially disreputable operator. If a security guard is meant to be monitoring a property then the owner needs to put in place checks to ensure that the guard is actually walking around the building at night, not just sitting down in front of the TV. One way to do this

8 «can be by putting in barcodes at points around the building that the guard needs to scan every hour. The main thing that property owners need to have is evidence that they have carried out these checks. Otherwise, it makes it harder for insurers to trust that they have gone through the right procedures to ensure security at their properties. It is the same situation for managing agents. If the owner does need to make a claim, it needs evidence that the agent has done what it says it has done. SitexOrbis Davison says he knows of one case where it took an owner three months to pull together the evidence the insurer needed because the managing agent did not keep records of their visits. The property owner struggled to come up with satisfactory evidence and the insurer refused the claim, he says. Davison says SitexOrbis takes photos and uses handheld computers that are date and time recorded, so it has evidence that a check has been done. Matthew Gordon, underwriting manager at Aviva, says that using reputable firms helps to maintain insurance and keeps down the cost of premiums. If we saw a property owner using a very reputable managing agent, we will know that the managing agent has very solid systems to check, good governance and they will be managing it through reputable people, says Gordon. A good managing agent is definitely an asset. He adds that providing a managing agent with a checklist that relates to the site can ensure a standard of surveillance. We know of situations where the managing agent has tried to save money, and just driven past the property in a van. For insurance purposes, it s meant to be internal and external inspections, and not doing that is clearly much worse in case the worst does happen, he says. 5 Get the squatters out Sometimes squatters will get in, and getting them out is not easy as many property owners think. That is because squatting is not recognised as a crime in England and Wales, and because there is a lengthy county court process to evict squatters. There is no official timeline and the whole process can take more than three months. However, it tends to go like this: A property owner finds squatters in their building so goes to a solicitor. At this stage you will need to provide evidence that this property is yours. This can mean finding Land Registry documents, title deeds and so on. After this, the owner can apply to the county court to start We know of situations where the managing agent has tried to save money, and just driven past the property in a van Matthew Gordon, underwriting manager, Aviva the eviction process. The court has 28 days to reply. That is one month since the squatters took occupation. The court gets back to the owner and says it has a hearing in, for example, nine weeks, although it depends in which area you are. In this case it has been three months between the squatting started and going to court. If the squatters put up a good fight in court then, even if you win right of possession, they may get a stay of execution. It could take two weeks to finally get them out after this. It can often be better to pay more to take the case to the High Court, as this allow owners to get rid of squatter a lot more quickly. Once a High Court order is granted, enforcement officers can remove squatters using reasonable force and take possession the same day. High Court Enforcement Officers (HCEO) are private companies, while county court bailiffs are civil servants. On 1 April 2004, the previous system of sheriffs officers was replaced. This change passed powers to High Court Enforcement Officers and gave them the power to enforce High Court writs. Using High Court Enforcement Officers is more expensive but it is also quicker. The extra cost is based on the hourly rate of the enforcement officer, but the squatters can be evicted on the same day, whereas with the county court it may be 12 weeks. Be prepared... Property owners hope they will never have to get rid of squatters. However, hope cannot take them anywhere. There are more useful precautions they can take from the risk assessment, to installing security and using reputable partners. The government has taken its own steps to help. In November, it published an online guide for property owners to keep out squatters. It was an attempt to counteract the numerous websites that tell prospective squatters how to break the law. The Ministry of Justice is also looking to make squatting a criminal office in England, as it is in Scotland. Squatting is a risk in any market and will not go away when the property market does eventually recover. With everybody under financial pressure, protecting assets that are not generating any income can seem like an unnecessary burden. But reinstating a damaged building without insurance support would cost much more. The views expressed in this publication are those of the author and not of Aviva Property Week is part of United Business Media Property Week Ludgate House 245 Blackfriars Road London SE1 9UY Tel: +44 (0) grant.elrick@ubm.com Web: propertyweek.com Aviva Insurance UK Limited 8 Surrey Street, Norwich NR1 3NG Web: aviva.co.uk/yourbusiness Design by Howells Design rob@howellsdesign.co.uk Photographs: Paul Borroughs, Press Association, Alamy, Dogbomb Cover photograph: Alamy