ASSET MANAGEMENT SALES LEASING VALUATION & ADVISORY SALES MANAGEMENT OWNER ASSOCIATION NEWS BRIEF 49 SUNDAY, 03 DECEMBER 2017 RESEARCH DEPARTMENT DUBAI | ABU DHABI | AL AIN | SHARJAH | JORDAN | KSA IN THE MIDDLE EAST FOR 30 YEARS © Asteco Property Management, 2017 asteco.com ASSET MANAGEMENT SALES LEASING VALUATION & ADVISORY SALES MANAGEMENT OWNER ASSOCIATION REAL ESTATE NEWS UAE / GCC REAL ESTATE RISK AND INSURANCE AMLAK REDEEMS DH100M FROM MUDARABA INSTRUMENT MUMBAI DEVELOPER TESTS WATERS IN POST-RERA AGE MANAZEL EYES SAUDI REAL ESTATE PARTNERSHIPS IN 2018 'CAN I REMORTGAGE IF MY VILLA NO LONGER HAS 25 PER CENT EQUITY DUE TO FALLING PROPERTY PRICES?' DUBAI DUBAI’S OFF-PLAN SALES TAKE A NOVEMBER DIP DUBAI’S HOTEL INDUSTRY COULD DO WITH A TWEAK DUBAI’S FREEHOLD OFFICES SEE A SALES SPIKE AHEAD OF VAT IDYLLIC URBAN LUXURY DUBAI'S TOP AREAS FOR HOUSE SALES AND RENTS WHAT IS A LUXURY HOME? DLD ORGANISES ROADSHOWS IN MOSCOW, LONDON FUNDAMENTALS OF DUBAI PROPERTY ARE IN TOP SHAPE WHEN OFF-PLAN SALES DOMINATED DUBAI PROPERTY HOW THE YEAR 2017 PANNED OUT FOR DUBAI PROPERTY DUBAI PENTHOUSE OR VILLA? FOR DH23.6M YOU CAN GET TWO IN ONE - IN PICTURES EXPO 2020 DUBAI SAYS DH10BN OF CONSTRUCTION CONTRACTS AWARDED THIS YEAR DUBAI LAND SALES SAID TO SOAR BY $8BN SINCE 2012 THE SANCTUARY: AN OASIS OF CALM IN THE MIDDLE OF THE CITY CENTRAL PARK TOWERS AT DIFC ATTRACTS STRONG PORTFOLIO OF OFFICE AND RETAIL TENANTS IN 2017 ABU DHABI A BIG-NAME PROJECT’S PULLING POWER DUBAI | ABU DHABI | AL AIN | SHARJAH | JORDAN | KSA IN THE MIDDLE EAST FOR 30 YEARS © Asteco Property Management | 2017 | asteco.com Page 2 ASSET MANAGEMENT SALES LEASING VALUATION & ADVISORY SALES MANAGEMENT OWNER ASSOCIATION REAL ESTATE NEWS ITINERA GHANTOOT NAMED LEAD CONTRACTOR FOR REEM MALL UAE'S MANAZEL SET TO HAND OVER ABU DHABI VILLAS NORTHERN EMIRATES FORUM TO DISCUSS GROWTH OF SHARJAH HOSPITALITY SECTOR SHARJAH RULER APPROVES 3.3KM CITY BEACHFRONT DEVELOPMENT INTERNATIONAL US EAST COAST REALTY OPTIONS FOR GCC INVESTORS INDIAN DEVELOPER LEARNS FROM DUBAI ON PAYMENT SCHEMES TURKEY, EGYPT PROPERTY BENEFIT FROM SHIFTING GEOPOLITICAL SANDS FIVE REASONS WHY THE WORLD'S PRICIEST PROPERTY MARKET KEEPS ON SOARING BIG SHIFTS COMING TO THE U.S. HOUSING MARKET IN 2018 DUBAI | ABU DHABI | AL AIN | SHARJAH | JORDAN | KSA DEFINING LANDSCAPES SINCE 1985 © Asteco Property Management, 2017 asteco.com Page 3 ASSET MANAGEMENT SALES LEASING VALUATION & ADVISORY SALES MANAGEMENT OWNER ASSOCIATION REAL ESTATE RISK AND INSURANCE Wednesday, November 29, 2017 As an owner-occupier, your primary risk would be damage or destruction to your real estate asset. As such your insurance will likely be for a lump sum amount or full replacement or reinstatement of the asset. Owner- occupiers may also insure for business interruption to cover them for lost income when the premises becomes unusable due to damage. This may be important, for example, where the owner has a mortgage and would have difficulty in meeting the repayments. An owner would generally take out insurance for third-party risks: for example, where a visitor suffers an injury caused by or occurring on the real estate asset. In transferring ownership of a real estate asset, the buyer and seller will need to establish a clear date for the risk of damage or destruction of the real estate asset to pass. The logical time for the passing of this risk is the date the title is transferred. Generally the seller will cancel the insurance on this date and the buyer will implement its own insurance. There may also need to be a clear position in the sale-and-purchase contract as to what may happen should damage occur between the date of contract and the date of title transfer. Where a real estate asset is tenanted, the lease contract may expressly address the allocation of risk between the landlord and the tenant and require the parties to obtain insurance. It is not possible to map out all of the possible variations in such arrangements, however, the following represents a fairly typical allocation of risk and insurance in a retail/office unit context. Fit-out period The landlord will generally require the tenant to have or procure contractors all risk insurance as well as worker’s compensation insurance. The landlord will generally require that the landlord is named co-insured and specify the level of cover the tenant must obtain or procure. Typically the insurance undertaken during the fit-out period will be obtained by the contractor completing the fit- out. The tenant will need to ensure that this insurance is obtained and contains the relevant covenants sought by the landlord under the lease agreement. Damage and destruction of the building The landlord would normally obtain all risk building insurance but may require the tenant to insure for damage arising out of the tenant’s or occupiers’ negligence. This could result in double insurance and an alternative approach would be for the tenant to be named as a beneficiary of the landlord’s insurance. This is, however, not the practice in the region. Landlords will typically exclude liability for any other types of losses sustained by the tenant — for example, economic losses when the tenant is unable to operate from the premises. Were the landlord to face a claim by the tenant in these circumstances, it may be that the landlord’s third-party liability insurance provides a measure of protection to the landlord. As the landlord will exclude liability for the same, the tenant may wish to obtain insurance for business interruption. As the landlord will be required to cease charging rent for the period the premises cannot be occupied, the landlord may wish to obtain loss of income insurance. It is common in the context of a commercial office or retail unit lease that the tenant would meet the landlord’s insurance costs as part of the service charges charged to the tenant. Tenant contents damage DUBAI | ABU DHABI | AL AIN | SHARJAH | JORDAN | KSA DEFINING LANDSCAPES SINCE 1985 © Asteco Property Management, 2017 asteco.com Page 4 ASSET MANAGEMENT SALES LEASING VALUATION & ADVISORY SALES MANAGEMENT OWNER ASSOCIATION The landlord may specifically require the tenant to insure the tenant’s contents, fixtures and fittings and to name the landlord as co-insured and/or require the insurer to provide a waiver of its right to sue the landlord in any case where the landlord’s negligence causes the damage. Third-party injury Third-party injury claims are civil wrongs and accordingly the party claiming damage or injury does not need to establish a relationship in contract with the party causing the harm. Generally, such claims will arise due to the party in control of the area not taking due care to ensure that areas are kept safe. Accordingly a landlord may wish to insure for any injuries that may occur to third parties in common areas of a building. As the tenant may also exercise control over their premises, the tenant should also take out insurance for such claims. Other third-party risks Other third-party risks arise in multi-tenanted buildings in that if a tenant damages the building, this may cause losses to other tenants. The landlord can seek to exclude liability for such claims in the contract with each tenant, but would very likely also cover such risks through their own third-party policies. As a tenant will have no ability to mitigate the possibility of claims from other tenants in contract, the tenant would need to obtain its own third-party policy to cover such risks. Developers, investors Throughout the construction of a project, the contractors will undertake the necessary insurances. As the developer will be paying progress payments throughout the construction, it is in the developer’s interest to ensure that this insurance is in place and that the developer is also co-insured under the contractor’s policy. It is also important to specify clearly under the construction contract when the developer shall be required to accept risk for the property following completion of construction and, therefore, should obtain its own insurance. If the project involves off-plan sales, then, once the development is completed, the developer will start handing over the units to the investors. Generally, in the case of jointly owned (strata) property, insuring the building, including the usual fitting and fixtures in the units, would be the responsibility of the owners’ association (OA). In cases where there is not a legally established OA, then it may be possible for the developer to obtain a policy that nonetheless recognises the interests of investors as beneficiaries of the policy. The developer or the OA will need to consider the type of policies they obtain. Generally speaking, such insurance will cover, and may be required to cover by law, full replacement and reinstatement, third-party liabilities and could cover loss of income or alternative accommodation costs. Investors would typically insure their own contents and improvements. Investors may also wish to obtain loss of rent insurance or insurance covering the cost of alternative accommodation if this is not taken out by the developer or OA. Summary This is a general discussion of the risks in real estate and how they may be addressed in contract and through appropriate insurance. As each property and transaction is different, the risks and insurance solutions may differ so it is important that each transaction is assessed on a case-by-case basis. Accordingly, this article should not be treated as advice as to what is required in any particular set of circumstances. Source: Gulf News Back to Index DUBAI | ABU DHABI | AL AIN | SHARJAH | JORDAN | KSA DEFINING LANDSCAPES SINCE 1985 © Asteco Property Management, 2017 asteco.com Page 5 ASSET MANAGEMENT SALES LEASING VALUATION & ADVISORY SALES MANAGEMENT OWNER ASSOCIATION AMLAK REDEEMS DH100M FROM MUDARABA INSTRUMENT Monday, November 27, 2017 Real estate finance firm Amlak Finance has redeemed a further Dh100 million of a Dh1.3 billion Mudaraba instrument agreed as part of its restructuring.