Now that we appear to be past the worst of the pandemic in this country, and efforts are made to re-introduce some form of work (construction being specifically identified by the PM), there remains a very real risk of a second spike. This second spike will prolong the containment measures and increase the financial pressure on the industry. This increased financial pressure brings with it risks to the entire spectrum of the property industry.
Re-igniting construction work is a relief, but for firms who are already suffering financial pressure, whether from inescapable staff and site costs, late valuations or inefficiencies due to materials or skills shortages; a second lockdown could spell disaster. If contractors fail financially, there will be a reliance on the contracts in place to properly protect everybody’s interests. There may need to be reliance on collateral warranties, performance bonds or parent company guarantees. Now might be a good time to check that the relevant contracts and warranties are in place.
The prolonged financial hardship might not have an instant impact on tenants, but the long term viability of existing premises may be scrutinised by the accountants. Tenants exercising their break options or choosing not to renew can result in retrospective chasing of dilapidations claims. Or worse still, tenants going bust can leave landlords holding all of the burden. Landlords should think about whether the mechanisms in their lease agreements are being properly used. Are the tenants keeping the properties in good repair? Is the service charge being used properly?
If, as it seems to be playing out, the country is expected to maintain social distancing for a long time to come; the requirement to distance ourselves could remain long after the taps of financial assistance have been turned off. A second spike will mean that the restrictions will be with us for some considerable time. The country will be expected to make a return to work, but how will landlords of multi-occupancy offices be expected to manage these risks and what liabilities will they have? How can anyone distance themselves in a lift or as they pass on the stairs? What measures will landlords be expected to introduce?
Even in single let properties, certain measures might need to be introduced to ensure safe long term social distancing. Additional temporary office space may be required, additional kitchens or break areas may be needed, additional temporary toilets, segregated pedestrian traffic flows might be required. All of these things come at an additional cost and require careful thought.
Nobody has a crystal ball to foretell what the future might look like, but in these uncertain times, we all need to be mindful of the risks of a second spike and how this might affect our own little slice of the property world.
I have set up DW Building Consultancy Limited to provide high quality, experienced, professional advice with a full perspective of the property industry, whether you need advice on construction projects, dilapidations, temporary works or just general advice on any property matter.