On Monday 25 July, Chestertons estate agents co-hosted a seminar with Sovereign Insurance Services on the liability issues arising out of property design, development and management. The event attracted a wide range of local property professionals together with individuals who give up their own free time to act as a property manager or resident council member at the development in which they live. Indeed, perhaps this latter group had the most to learn from the speakers, who set out what liabilities those in a decision-making position might have.

Introduction

The event was chaired by Mike Nicholls, managing director at Chestertons, who stated why he felt compelled to organise the event in the first place, “Last month's tragedy is a chilling reminder to those involved in building estate management of the potential liabilities that may arise from alleged poor decision making. The vast majority of Gibraltar's population lives in some form of shared leasehold accommodation. This means that the residents, via their own committee structure or via an appointed third party estates manager, take key decisions on managing the building. Decision making means individual or corporate exposure to potential liability claims. As an advisor to property developers in a professional capacity and a resident’s council member of the Ocean Village estate in a personal capacity, I wanted to review my insurance cover. When I spoke to Sovereign Insurance, it appeared I was not the only one asking these questions, so between us, we decided to host this seminar.”

Legal

So what did the seminar teach its attendees? The first speaker was Nicholas Howard, partner at Hassans, previously involved in litigation and dispute resolution and more recently heading up the firm’s property department. In a wide ranging introduction to the law of property, predominantly in respect of landlord’s responsibility once a building was occupied, he warned the audience, “in Gibraltar, in most cases, the management company (with tenants as members and appointed directors from amongst them) is effectively the landlord and owner of all common areas with responsibilities and obligations arising therefrom. A headlease will contain obligations on the landlord (and therefore the management company in most cases) to broadly repair, maintain and renew all: lifts and other machinery; conduits plant and equipment servicing the development; fire alarms and sprinkler systems etc; and all common parts and external areas (which will extend to decorating and cleaning and adequately lighting these areas). The overriding focus of any landlord / management company is, therefore, to ensure that it puts in place a careful plan for the regular maintenance, repair and upkeep of all common areas along with plant and machinery within a development and that it has a system of checks and balances to ensure that this is being properly undertaken.”

He went on to state that, “it will not be any defence to a landlord or management company to say that they fell short of meeting the repairing and maintenance obligations by virtue of the fact that it lacked the funding so it was equally important to ensure service charges were collected in a timely manner.” 

 Insurance

The keynote speaker was Brian Bendle, a liability insurance specialist from London who had previously advised the Financial Conduct Authority and sat on a number of trade bodies in respect of his liability insurance knowledge. His key messages were to be aware of what liabilities one has as a property owner, “Owners of property can be legally liable for bodily injury or property damage to third parties caused by their property. Such claims can be substantial and it is vital that appropriate policies are in place with adequate limits to cover such claims.”

Brian encouraged active liaison with insurers to keep them advised of any refurbishment or alterations being undertaken as any material change to a property, if not declared, could give the insurer an opportunity to reject a claim. Brian encouraged professional indemnity cover for property managers appointed by landlords to perform their leasehold duties, “These entities are providing a professional service for a fee and are therefore exposed to litigation should they breach service agreements and are found to be legally liable”.

On the personal liability side, Brian gave a deep insight into director’s and officer’s insurance, a policy which “indemnifies individuals who form the management of companies (directors, officers and indeed any employees or volunteers in a management capacity) for claims against them arising from breach of duty or trust in the running of their management companies. Policies vary but can cover individuals for involuntary manslaughter, constructive manslaughter, gross negligence manslaughter or a breach of the applicable Health & Safety legislation. It will exclude taxes, fines, penalties or any claim deemed to be legally uninsurable.”

Summing up

Geoff Trew, chairman of Sovereign Insurance Services and an insurance expert of some 40 years summed up as follows, “There is not much more for me to add following the deliveries of Nicholas and Brian except that a key word for me when considering management liability is ALLEGED wrongful acts. In the aftermath of Grenfell all sorts of allegations are going to be made by parties looking for monetary compensation and the respective nets will be cast far and wide. Any such allegations will have to be defended which invariably will mean expensive legal costs and a great deal of management time in preparing the defence. A proper director’s and officer’s policy wording would cover such costs.

In a lively question and answer session it was clear that concerns of property professionals and volunteers, has manifested itself in Gibraltar. As Mike Nicholls said, “We know from the recent Jyske and RBS Marrache cases that litigators will not hold back from seeking accountability of alleged wrong-doers and compensation for their clients, many years after the event if necessary. Gibraltar is not immune from litigation should, God forbid, there be any disaster from a property related issue”.