Succession planning: The impact of health and safety when selling commercial property

When carrying out due diligence in advance of a commercial property purchase, the buyers may seek a reduction in the purchase price of the building, along with any associated plant and machinery, if health and safety documentation is either missing or not up to date. Below, we explore some of the steps you can take to review your health and safety documentation in order to increase the value of your property.

Asbestos

If you are the owner of a commercial property, you have a duty to manage any asbestos within the building. Once a popular building material, it is now illegal to use asbestos in the construction or refurbishment of any premises due to the serious risks to health that asbestos can present. There are however still many older premises in which asbestos can be found and because it is only a risk to health if fibres are released into the air and breathed in, management of asbestos is crucial.

Any buildings which were built or refurbished before the year 2000 may contain asbestos. The Control of Asbestos Regulations 2012 set out what dutyholders need to do in respect of the risks. You should find out if asbestos is present and make a record of the location, type and condition of the asbestos; assess the risk of anyone being exposed to the asbestos; prepare a plan on how to manage the exposure risks; monitor the plan and update it if there are ever any changes and provide this information to anyone who might work on or disturb the asbestos.

If your review identifies that there is asbestos present, depending on the condition and/or type of the asbestos or what your prospective buyer intends to use the premises for, you may consider removing the asbestos which will make the building a more attractive proposition for the buyer and thus increasing your negotiating position.

Plant and Machinery

If you are selling the premises along with any plant and machinery, you could provide any inspection documents or risk assessments you hold in accordance with the Health and Safety at Work etc Act 1974 and regulations such as the Provision and Use of Work Equipment Regulations 1998 (PUWER), the Lifting Operations and Lifting Equipment Regulations 1998 (LOLER).

Any inspections should be carried out by a competent person and this may be someone who is part of the company, or it could be an external engineer or expert, such as someone employed by your insurance company who is tasked with reviewing your plant and machinery on a regular basis for the purposes of reinsuring your business.

Inspections should identify whether the equipment can be operated, adjusted and maintained safely and detect any damage to the equipment, or wear and tear, and ensure that it is remedied before it results in unacceptable levels of risk

Being able to provide an organised suite of inspection documents, showing well maintained equipment and risk assessments for the use of the equipment will allow you to gain the best possible purchase price for your plant and machinery.   

Fire Safety

The topic of fire safety has become much more prominent since the fire in Grenfell Tower which has led to a nation-wide review of cladding on residential buildings and a review of general fire-related policies such as evacuation procedures.

You should already have a fire safety risk assessment in place, but prior to the sale you may wish to review and update it if necessary. This demonstrates a proactive approach to managing the risks which will be appreciated by your prospective buyer. You should identify any dangerous substances which can result in fires or explosions as required under the Regulatory Reform (Fire Safety) Order 2005 and take the opportunity to review your housekeeping – is there a need to remove a build up of rubbish, dust or grease that could start a fire? Doing so will not only make your asset safer, but also more desirable to buyers.

Fire-fighting equipment, evacuation equipment, fire alarms and emergency lighting should also be serviced and in good working order, with records to show the date of the inspections which will allow them to be included in the sale as part of the investment opportunity.

Electrical Installations and Gas Appliances

The replacement of wiring within the building and / or any large gas heaters can be extremely costly, and this can be a significant point for negotiation for buyers. In order to take a robust stance in relation to such items, you should provide your certification and maintenance records for any applicable appliances or electrical systems, in order to evidence that they have been tested on a regular basis and in line with the relevant regulations.

The British Standard BS 76710 (IET Wiring Regulations) advises that inspections of electrical installations at commercial premises should be tested once every five years. The Gas Safety (Installation and Use) Regulations 1988 require an annual inspection by a Gas Safe registered engineer and for records to be retained for at least two years thereafter.    

Legionella

In the past year, as many businesses have been closed for prolonged periods it has been more important than ever to review your legionella risk assessment. Water system stagnation can occur due to lack of use which increases the risk of Legionnaires’ disease.

If used infrequently, hot and cold water outlets should be flushed out on a weekly basis to prevent stagnation, or systems should be cleaned and disinfected before the building is occupied. Air conditioning units may need to be cleaned before they are turned back on and commercial spa pools and hot tubs should be drained, cleaned and disinfected before you start to use them again.

You can instruct a specialist to deal with any of the above measures, and once again dealing with the risks leaves less room for negotiation from the buyer.

Enforcement Notices

If instructed on behalf of the buyer, we would always review the HSE’s enforcement database to establish whether there are any relevant health and safety enforcement notices or prosecutions. It is therefore important to prioritise health and safety at the premises so that regulatory intervention cannot be used as a bargaining chip to reduce the purchase price of the property.

Any enforcement notices served should be dealt with promptly and it is advisable to keep records of the steps taken in the event that the buyer wishes to inspect the same.

Often SMEs do not have the resources to employ a suitable person to ensure that health & safety risks are adequately managed.  We also sometimes find that those employed by SME’s in a safety role are inadequately qualified and trained. It is of course a complete false economy to skimp upon health and safety. 

There are some generic ‘off the shelf’ Health & Safety products on the market but they cannot adequately protect the business because they are largely generic in nature when health and safety needs to be completely specific to your individual business. At Brabners, we have developed ‘Brabners Protect’, a product which will review the needs of your business and prepare a suite of cost-effective policies tailored to your business, as well as being on hand to provide legal and technical support when you need it most.

If you require any assistance in reviewing your policies, procedures or risk assessments whether prior to a sale or more generally, please do not hesitate to get in touch with a member of our Regulatory Team who will be pleased to advise and assist.