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Whether you have a high street pharmacy or a dispensary in a health centre, most leases require the landlord to insure the building. This obligation usually covers risks such as fire, lightening and flood. If the pharmacy is damaged or destroyed by one of these risks, the lease explains who is responsible for repairing the damage and who pays the cost.
However, some leases don’t deal with what happens if the pharmacy is damaged or destroyed by a risk that isn’t covered by insurance (“an uninsured risk”). Terrorism is often quoted as a risk that isn’t covered by insurance. However insurers are increasingly withdrawing flood risk from their insurance policies, following the recent disasters seen across the country.
The pharmacist is responsible for repairing the whole of the property let to them. Most repair obligations are limited to exclude damage by a risk that the landlord has insured against. However they often don’t deal with what happens if the property is damaged or destroyed by a risk that the landlord has not insured against. This could be due to an exclusion or limitation in the policy, or because insurance is simply not available.
If the pharmacists repair liability isn’t limited, they will remain responsible for the cost of, and the carrying out of, any repair or reinstatement works required. Where the lease is a lease of part of the landlord’s building, such as a pharmacy within a health centre, the landlord is likely to be able to recover their costs of repairing the structure of the building where damaged or destroyed by a risk they have not insured against through the service charge.
If the pharmacy can not be used due to damage by a risk that is not covered by insurance, the pharmacist may not only find themselves responsible for the cost of repairing any such damage caused, but may also remain responsible for paying the rent for the pharmacy during the period that the property cannot be used because of the damage caused.
Uninsured risks need to be considered when pharmacists are looking to buy an existing lease, take a new lease or renew an existing lease. In the current climate most commercial landlords are alert to the difficulties caused by uninsured risks and are willing to agree something with the pharmacist to make it clear exactly happens if the pharmacy is damaged by one of these risks. However it will often depend on the bargaining power of each party as to whether the pharmacist can shift the responsibility for uninsured risks onto the landlord.
In order to retain continuity of services, depending on the extent of the damage, the pharmacist may need to make alternative arrangements to continue trading whilst the pharmacy cannot be used. It is therefore important to make sure that they don’t have to pay rent for two properties during this period, are not responsible for exorbitant repair costs and that the timer periods for works to take place are appropriate and agreed for the relevant situation.
For more information please contact Tim Jenkins, Partner
T: +44 (0)1483 252529