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Property risk insights - time for a change?

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By Paul Clark | March 5, 2020

It is common for commercial landlords to believe that the contractual relationship they have with their managing agents will protect them from liability when things go wrong. However, there are circumstances when the contractual relationship will not provide protection and none more so than the area of health and safety regulatory compliance.
£10million
The fine that large businesses could receive for health and safety offences 

Much will depend on the relationship between the parties. However, landlords must appreciate that appointing managing agents or contractors will not necessarily absolve them from liability so far as regulatory enforcement proceedings are concerned and that selection, performance and management of the contract or work are all key factors should a near miss or incident occur.

The changes to criminal sentencing in this area were introduced in 2016 and have significantly increased the risks facing landlords as the fine they may receive is not dependent upon the extent of their perceived failing in any given event, but primarily based on the size of their corporate turnover. This means that in the event of a health and safety prosecution a landlord’s fine may be significantly larger than that of its managing agents.

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A case study

There have been a number of instances where landlords and managing agents have been prosecuted and fined for breaching their legal duties. In one case, a property owner and the management company engaged to run the day to day activities of a hotel and spa were fined when a number of guests and staff members inhaled fumes from incorrectly mixed cleaning products1 , although a more recent case best illustrates the risks facing property owners and landlords.

One certain case concerned a five year old girl who was tragically trapped in a defective disability lift sustaining fatal injuries.2 The landlord, its managing agents and the lift maintenance contractors they engaged were prosecuted as a result. Read more here

court hammer
‘Sentencing Guidelines’ - What are they and why were they introduced?

The Sentencing Council’s guidelines for fines for health and safety offences3 are used by both the Magistrates and Crown Courts to determine the level of fines handed down for breaches of health and safety regulations. A fine will be based on corporate turnover. In practice, this means that a landlord’s fine may be significantly larger than that of its managing agents. The primary elements of the guidelines are that any fine must:

  • Reflect the seriousness of the offence
  • Take into account the turnover (as opposed to profit) of the offender
  • Reflect the extent to which the offender fell below the required standard
  • Meet in a fair and proportionate way the aims of punishment and deterrence.

Read more about the guidelines and the fines that can be incurred here

quill and paper
Changing Regulatory Landscape

Given the changing regulatory landscape as demonstrated by the case examples, there is more pressure on landlords to evidence robust management ‘from the top’ regarding their practices and policies for keeping people, employees and third parties safe. This includes being able to demonstrate and evidence that they have a pro-active relationship with their managing agent and that managing agents are simply not left to “get on with it”.

HM Government has also recently refocused its attention on health and safety regulatory compliance. In addition to the introduction of the health and safety sentencing guidelines, there have been two significant developments. To read more about these developments, click here

protection shield
How Can Willis Towers Watson Help?

Our Claims Defensibility & Regulatory Practice has developed a number of services to help prevent and defend regulatory action:

  • Director/Senior Manager H&S Governance Briefing
  • Regulatory Defensibility Review
  • Regulatory Mock Trial Training
  • Bespoke Accident/Incident Investigation Training
  • Contractor Management Training

Footnote

1 https://www.maidenhead-advertiser.co.uk/news/maidenhead/122847/fredrick-s-hotel-fined-after-employees-are-hospitalised-by-accidents.html

2 https://www.bbc.com/news/uk-england-dorset-46874763

3 https://www.sentencingcouncil.org.uk/

Author

Claims Defensibility and Regulatory Practice Leader

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