Integrated property development…what does it mean to you?

Are integrated developments riskier?

by Tho Li Ming of theedgemalaysia.com on Wednesday, 29 February 2012 08:29

Mixed-use developments offer many benefits but expose residents to dangers such as gas explosions in restaurant kitchens. Protect yourself by asking these questions.

KUALA LUMPUR: In the wee hours of Sept 28 last year, Empire Shopping Gallery (ESG) in Subang Jaya was rocked by an explosion that was later attributed to a gas leak.

ESG is part of an integrated commercial development that includes Empire Hotel, Empire Tower (offices) and Empire SOHO (small apartments that double as offices).

The explosion injured four people and was reported to have damaged over 40 shops in the year-old complex. Although the damage was limited to the outlets, those living in Empire SOHO and Empire Hotel were asked to evacuate. The cause of the gas leak has yet to be made public.

Unlike incidents that are regarded as “acts of God”, man-made ones are caused by human error, and they include fires, gas explosions and bursting water pipes.

The incident at ESG speaks volumes about the risks of living above or next to restaurants and retail outlets.

But industry players say the risks associated with such developments are only slightly higher than those in standalone commercial and residential developments.

Helmmy Shahny Mustafa, vice-president of MIT Insurance Brokers Sdn Bhd, agrees that more accidents may occur at an integrated development but says the potential amount of damage must be taken into account.

“In some residential areas, petrol stations are built next to houses. To me, living in those areas is even riskier because an explosion at a petrol station causes far greater damage.”

Perhaps the best way to evaluate the type of risks associated with an integrated development and the impact any accidents may have on the property is to look at the property manager’s attitude and the safety precautionary measures it has put in place.

1 How do you ensure our safety?

When ESG was reopened to the public, the property manager released a press statement stating that they had implemented extra safety procedures that were over and above “the required standards in Malaysia”. These included “outfitting F&B outlets with a new gas line system which would automatically switch off the internal gas supply if a leak is detected”. This system is linked to a master control that will cut off the supply of gas at a certain time, it said.

Ideally, a development should have state-of-the-art safety equipment and measures in place before residents and tenants move in.

CC Yeap, executive director of Tropicana City Sdn Bhd, which operates

Petaling Jaya’s Tropicana City mixed commercial and residential development, says tenants or property owners should broach this topic with the property manager. “If you are living in the residential section of a mixed-use development, the security and maintenance team should have a procedure in place to respond to emergencies.”

A property manager should also conduct regular safety checks and ensure that equipment in each building is not faulty. “Things are more complicated in integrated developments. There are more power cables, air-conditioning chillers, and back-up generators that run on diesel. There is a higher safety risk if such equipment is not regularly maintained,” says Yeap.

Evaluating the effectiveness of any proposed maintenance schedule is however, largely guesswork since there isn’t an industry average or recommended best practice. Yeap gives an indication as to how maintenance can be scheduled.

“Although we hire third-party professionals to do some maintenance work, there is an internal mechanical and engineering department that checks the equipment and machines over and above what is done by the third party. Lifts in the building are maintained by third-party professionals. Smoke detectors are examined monthly by hired consultants, generators are checked every month and we test them once every six months to ensure that they are functioning well.”

The property manager’s standard safety processes should also be extended to any residential properties in the integrated development, says James Tan, associate director of Raine & Horne International Zaki + Partners. “They should be testing fixtures in the building, particularly sprinklers, smoke detectors, heat detectors and other inflammables.”

Where buildings have their own generators, additional precautionary measures should be put in place.

“There needs to be annual checks, at the very least, by firemen and/or third-party professionals. The best practice for the property manager is check for telltale signs on a daily basis. This includes checking the electricity supply and the pressure for the sprinkler tanks,” says Helmmy.

2 What insurance coverage do I need?

Which insurance policy to take up largely depends on whether you are living in or running a business in the integrated development. If it is the latter, you must think about covering business assets that can be very costly to replace.

Widely recommended is fire insurance, which covers both “man-made” disasters as well as “acts of God” such as fires caused by an exploding gas cylinder and lightning respectively.

“This is treated as the duration needed to rebuild, repair and restore operations.”

Both residents and business owners should examine their contract or tenancy agreement for a “denial of liability” clause. “There is no such thing as a standard contract. It boils down to the bargaining power of both sides.

Even if you can’t change it, you must read it to know what you can and cannot do.

But regardless of what is in the contract, if you can prove that an accident was caused by wrongdoing, negligence and/or wilful act or omission of the property manager, you can initiate a suit for your loss,” says Chris Tan, managing partner of legal firm Chur Associates.

Also, look out for a clause that says rent or service charges must be paid even when the business cannot operate or a resident cannot stay in his premises after an incident has occurred.

“Businesses should ask for a clause that says payment of rent will be suspended when they are unable to operate from the business unit. Likewise, property owners should have a clause that exempts them from paying service charges such as maintenance fees.

Sometimes, these clauses are included and sometimes they are excluded. It pays to read the fine print,” adds Tan.

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