UK: Retail Bulletin - The Riots And The Retail Sector

Last Updated: 11 August 2011
Article by Ross Berridge and Balbit Thandi

Retail landlords and tenants have been amongst the worst affected by the recent civil disorder. For some tenants it may be the end of their business but for most it is now a matter of minimising the disruption to their operations. Similarly for landlords they must reinstate their premises as quickly as possible. The specific terms of the lease and of the insurance policy will be crucial. There is no alternative but to carefully review those documents in each case but the following broad principles are likely to apply :-

  1. Riot and civil disorder will generally be an insured risk under the terms of a retail lease and will be included within the terms of most commercial insurance policies.
  2. Usually it is the landlord's responsibility to arrange insurance for the premises, but for the building only, not the contents or the occupying business use. It will be for the tenant to insure against loss of, or damage to, stock and interruption to its business.
  3. It is the tenant's responsibility to ensure that the landlord is given immediate notice of the occurrence of any damage or loss arising from an insured risk which might affect the insurance policy relating to the premises. There may be provisions in the lease specifying how this notice has to be given.
  4. Insurance claims may need to be made within a very short period of the damage occurring (perhaps 7 days). Insurance companies are very likely to reject claims for business interruption caused by the closure of premises on a precautionary basis unless the policy is clear.
  5. The cost of replacing plate glass usually isn't included in the insurance cover on the basis it is cheaper to replace the glass than to insure it. This cost will fall to the tenant.
  6. If the premises are destroyed or damaged to the extent that they are unfit for occupation or use then payment of rent will usually be suspended until the premises have been reinstated or until the end of a fixed time period from the date of damage or destruction, if sooner.
  7. If the landlord considers that it is impossible or impractical to reinstate the premises the landlord may be able to terminate the lease upon giving notice to the tenant.
  8. Similarly the tenant may be able to terminate the lease by giving notice to the landlord if, following damage or destruction of the premises by an insured risk, the premises have not been reinstated within a fixed time period after the date of the damage or destruction.
  9. The tenant's repairing covenants will not extend to disrepair caused by an insured risk unless the insurance policy has been vitiated or the insurance proceeds withheld due to an act or omission of the tenant.
  10. Businesses without adequate insurance might be able to make a claim under the Riots Damages Act 1886 direct to the police but must do so within 14 days of the damage occurring. The claim is based on the theory that the police are responsible for maintaining law and order and, if they fail to do so, they pay for the damage. Such a claim would be unlikely to extend to losses for business interruption.

The contents of this article are intended as guidelines for clients and other readers. It is not a substitute for considered advice on specific issues. Consequently, we cannot accept any responsibility for this information or for any errors or omissions.

Thomas Eggar LLP is a limited liability partnership registered in England and Wales under registered number OC326278 whose registered office is at The Corn Exchange, Baffin's Lane, Chichester, West Sussex, PO19 1GE (VAT number 991259583). The word 'partner' refers to a member of the LLP, or an employee or consultant with equivalent standing and qualifications. A list of the members of the LLP is displayed at the above address, together with a list of those non-members who are designated as partners. Regulated by the Solicitors Regulation Authority. Lexcel and Investors in People accredited.

Thomas Eggar LLP is not authorised by the Financial Services Authority. However, we are included on the register maintained by the Financial Services Authority so that we can carry on insurance mediation activity which is broadly the advising on, selling and administering of insurance contracts. This part of our business, including arrangements for complaints and redress if something goes wrong, is regulated by the Solicitors Regulation Authority. The register can be accessed via the Financial Services Authority website. We can also provide certain further limited investment services to clients if those services are incidental to the professional services we have been engaged to provide as solicitors.

Thesis Asset Management plc, our associated financial services company, provides a comprehensive range of investment services and advice. Thesis is owned by members of Thomas Eggar LLP but is independent of and separate to it. No lawyer connected with Thomas Eggar LLP provides services through Thesis as a practicing lawyer regulated by the Solicitors Regulation Authority. Thesis is authorised and regulated by the Financial Services Authority. Thesis has its own framework of investor protection and professional indemnity cover but Thesis clients do not enjoy the statutory protection of solicitors' clients.

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