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Speedy recovery: 5 steps for small businesses after a natural disaster

Unfortunately, many retail and small businesses never recover from these extreme weather events. Those who do, often struggle under the weight of massive financial losses resulting from damage to their stock, fixtures and fittings and the actual building as well as the loss of trade during and after the event. Even when they manage to re-open, sales can be heavily impacted for many months as the entire trade area and regular customers are also affected and trying to recover.

Here are our Top 5 tips to lessen the longer-term impact and improve your chances of a quick recovery.

1. Know your lease

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Your lease will usually include a section covering your responsibilities as a tenant around insurances. It will require you to have insurance cover with a reputable insurer for the usual risks covering the tenant’s property within the premises for its full value, while at the same time require you as the tenant to indemnify the landlord against any action or demand due to any damage, loss or injury caused by various situations such as a natural disaster.

The lease should also cover the responsibilities of the landlord should your tenancy be damaged or destroyed resulting in you not being able to use or access the premises.

Generally, in these situations, the lease does continue, however, the tenant may terminate the lease with just five business days’ notice if the landlord does not begin to repair or re-build the premises within a reasonable timeframe.

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If the landlord does begin to re-build the premises, he or she is not liable to pay the tenant compensation but must reduce the base rent and any other money by a reasonable amount depending on the type and extent of the damage.  This can be a delicate negotiation between the tenant and landlord and the outcome can be significantly improved by a specialist lease negotiator representing you.

2. Know your insurance

It is your insurance company, and not your landlord, with whom you will need to lodge a claim as soon as possible after the disaster.

Contact your insurance broker or your insurer direct as soon as possible to open a claim and ask what their exact requirements are for a claim to be processed then set about documenting all damage and compiling all information your insurer requires to process your claim.

Many insurers specific definitions of what is covered, so the first point of business is determining what your insurers classify as ‘flooding’.  In some cases, ‘Acts of God’, and ‘Natural Disasters’ may be excluded so you’ll need to have the tough conversations with your insurer as your first priority to make sure your claim will be accepted.

3. Contact your Landlord

Your landlord is in the same situation as you and will also be working with their insurers to begin a claim for any damage to their asset. It is in both of your best interests to ensure the insurance claims of both the landlord and tenant are approved and the process can be much quicker if you provide each other with whatever information is needed for the claims.

Contact your landlord as soon as possible to get an understanding of their claim and expected timeframes for any repairs needed so you can get your shop trading again and return to full capacity as quickly as possible. Timeframes for your landlord’s insurers to assess and provide cover for repairs to the building could prevent you from trading and may also have an impact on your own claims.

4. Document everything

Hopefully, your insurer has agreed that the event is covered under your insurance. To assist with your claim being dealt with as quickly as possible, it is important to ensure you document everything. Document your preparation leading up to the disaster. If possible, have photos of the steps you took to prevent damage e.g. sandbagging, moving stock etc.

Without putting yourself in any danger, get photos or videos to show how the damage was caused e.g. flooding, rising tide, controlled release of water, roof leaks etc. And then, once the water has subsided, take photos of the damage including stock, fixtures and fittings and your tenancy itself e.g. paint, carpets or flooring, walls, etc. Even keep newspaper articles to show the impact of the event specific to your shopping centre, strip of shops or local area.

5. Claim FUTURE losses

Your insurance claim will remain open as you begin to calculate the losses to the business including the revenue losses during the time you were closed as well losses you incur AFTER you re-open if you were unable to return to normal trading conditions due to the damage caused to your premises and/or the landlord’s building, or your turnover is less than it was prior to the disaster for a reason you can attribute to the disaster or the recovery from it.

For this, you’ll need to show your revenue before the event, during the time you were unable to trade as well as the time it took to return to the same level of turnover as before the disaster. Your accountant should be able to help you put this into the correct format to include in your insurance claim.

Whilst your first call should be to your insurance broker or insurer direct, there are always opportunities to negotiate some beneficial outcomes with your landlord when these types of situations occur.

The landlord is not liable to pay compensation for loss or damage suffered where they take action which is considered a reasonable response to an emergency, but they may be willing to negotiate variations to your lease which assist you in the short term which provides both the tenant and landlord with positive longer term outcomes.

If your shop has been affected by the recent flooding, you can call us to help understand your rights under your lease and the relevant retail tenancy legislation. We can also discuss what opportunities may be available to you to assist in the short term to ensure you stay in business and make the best recovery in the shortest period of time.

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