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Big claim re let property

Mr G took a 9-month lease on an office. He was assured that he did not need to insure the structure of the office, but this was wrong advice. The boiler exploded soon after he moved in, and he has been told by the letting agent that he is responsible for the resulting repairs of £100000. His profits are only around £50000 per annum. Will there be any problem in getting tax relief on such a large amount?

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09th Aug 2010 11:22

I'm a bit confused

How can a boiler explosion cost £100,000 to repair?  The boiler alone would only cost a fraction of this.  What other damage was there to make up £100,000 of repairs?

What sort of office is it?  If it was a standalone building, I can understand that the tenant might have been required to insure the building, but most offices form part of a larger building and in almost every case, the landlord insures the building and splits the cost amongst the various tenants.

If he was required to insure the building and the boiler is treated as part of the building, who advised him he didn't need to insure it?  Any possibility of claiming from them?

Did Mr G not have contents insurance that would cover the damage to the boiler and that usually comes bundled with third party insurance that would cover the consequential damage?

However, if Mr G is legally liable for the £100,000 of repairs to his business office, it is a deductible expense, just as the insurance premiums would have been, but HMRC will obviously need some explanation before allowing it.  You will probably need to produce some evidence that the legal liability was indeed Mr G's.

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By PennyC
09th Aug 2010 11:34

I too am puzzled

If the landlord has not insured the building, then who has? It seems distinctly odd that tenants would be required to insure it on a lease by lease basis. What happens if there is a gap between leases? I think Euan made a very good point - who advised that no insurance was required, and is that advice in writing?

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By noradh
10th Aug 2010 09:50

From the OP

The client's solicitor tells him that it is a common misconception that the tenant does not need buildings cover. The landlord's insurance never covers things that arise due to the fault of the tenant. He was unfamiliar with this type of boiler and put it on the wrong setting for the weekend. There was a huge amount of damage to the building, and the tenant must of course pick up the tab.

 

 

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By PennyC
10th Aug 2010 10:15

But

As Euan pointed out above, did the tenant not have adequate contents isnurance to cover consequential damage to 3rd party property?

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By noradh
10th Aug 2010 11:32

OP again

Contents insurance does not cover major structural damage.

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10th Aug 2010 11:55

Not the contents insurance

... but the third party liability insurance that is usually bundled with office contents insurance.  We are not talking about insuring for damage to the property, but insuring for negligence claims made by third parties.  This is just like motor third party insurance.

Did the client not insure for injury to employees or visitors to his office?  If he was covered for this, check the policy.  It may include the third party cover.

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10th Aug 2010 16:38

Agreed Euan

Tenant has no insurable risk in the building, this is a liability insurance claim.

Solicitor talking through..

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