Insuring a retail unit in Morocco: the landlord's shell, the tenant's fit-out

The most brutal scenario in retail is not the fire itself. It is the shop rebuilt and the business not rebuilt — because nobody had declared the fit-out.

1. Three perimeters, three policies: the anatomy of a shop loss

On a villa or a flat the question of perimeter settles quickly: one owner, one building, one policy. On a leased retail unit — the dominant configuration in Moroccan trade, from the corner shop to the mall unit — the same loss engages three sets of property whose ownership and whose insurance do not overlap.

• The shell — structure, façade, the shopfront in its structural part, the floor above or the roof, incoming services, sanitary accommodation, stockroom and back-of-house. This is the landlord's perimeter, insured as part of the property holding.
• The fit-out and improvements — everything the tenant has installed to make the unit usable and true to its concept: shopfront and signage, window dressing, partitioning, suspended ceilings, feature lighting calibrated on the merchandise, floor finishes, counters and fixed display joinery, added air conditioning, and the electrical and data installations specific to the trade.
• The contents — stock, merchandise, trading equipment, till and IT: the tenant's perimeter again, but under a distinct heading of the policy, with its own rules of valuation.

For as long as nothing happens, that split stays theoretical. On the day of the loss it becomes the only thing that counts: every destroyed item has to find its heading on a policy, failing which it stays with whoever paid for it. The general principle — reinstatement cost as new, land excluded, adjusted to the basis in the policy — is set out in our complete guide to reinstatement cost assessment; the difficulty specific to retail is knowing who declares what, and for how much.

2. The shell: what the reinstatement cost really covers

On the landlord's side the logic is that of any built asset: the sum insured is not the market value of the unit — which embeds the land, the trading pitch and the yield expected from it — but the cost of rebuilding the fabric as new. Land does not burn; nor does a pitch. What is rebuilt, and therefore what is insured, breaks down as follows.

• Structure and shell — foundations on the terms of the policy, load-bearing elements, floors, the floor above or the roof of the unit.
• The façade and its openings — the trading frontage, its openings, lintels and architectural treatment: on a ground-floor unit the façade concentrates a significant share of the cost of putting the property back.
• The shopfront in its structural part — the glazed opening, its framing and its closures belong to the fabric; the dressing and the display staging of the window fall on the tenant's side of the line. The boundary runs exactly there, and it is one of the worst documented in contracts.
• Incoming services and sanitary accommodation — water, electricity and drainage connections and capped services, WC blocks: the basic provision that makes the unit lettable.
• Stockroom and back-of-house — space that carries little commercial value but is entirely real to rebuild, including storage mezzanines where these are a structural work.
• Access and the entrance in its built part — thresholds, lobbies, shutters and security grilles, canopies and masonry awnings.

Three heads of cost are almost systematically missing from declared sums insured. Professional fees — architect, engineers, technical control: premises open to the public are not rebuilt without a design team. Demolition and debris removal — clearing rubble in a dense urban setting, often with access and highway constraints, carries a cost of its own. Rebuilding to current standards — accessibility, fire safety for premises open to the public, present-day electrical standards. A building is not rebuilt under the rules of its year of construction, but under those in force on the day of the loss.

3. The tenant's fit-out: the heaviest line of all

In organised retail, in food and beverage, in pharmacy, in jewellery or in any franchise with an imposed concept, the fit-out investment can represent the greater part of what the operator has actually committed to the unit. The tenant often takes a bare shell or a second-hand unit and builds on top of it: raised or technical floors, acoustic suspended ceilings, lighting calibrated on the products, bespoke gondolas and counters, cold rooms and preparation areas for food service, secured display cases and safes for jewellery, confidentiality zones and regulated storage for pharmacy, illuminated signage, air conditioning sized for the footfall.

None of that is a wall — and none of it is contents in the sense of the policy. It is a category of its own, fit-out, alterations and improvements, which must appear explicitly in the contract with its own sum insured. Where it does not appear, or appears at a token figure inherited from the opening of the store, the operator discovers after the loss that the stock was insured and the shop was not.

4. Who owns the fit-out? The end-of-term clause governs everything

The question looks legal and remote; it is in fact the key to the whole insurance architecture of the unit. Depending on how the lease is drafted — and in particular on how it treats improvements at expiry — fit-out and improvements carried out by the tenant pass to the landlord at the end of the term, with or without compensation, or remain the tenant's property with an obligation to strip them out. That characterisation determines directly who holds an insurable interest in those items, therefore who declares them and on which policy.

Two symmetrical mistakes follow, and both are expensive.

• The fit-out insured by nobody — the landlord takes the view that only the shell is theirs to insure, the tenant takes the view that only the stock is theirs, and the entire fitting-out of the store falls outside cover. It is the most frequent scenario, and the most brutal: the unit is rebuilt, the business is not.
• The fit-out insured twice — landlord and tenant have each folded the same items into their sum insured. Two premiums are paid every year for a settlement that will in any event be capped at the actual loss, and that will generate a discussion between insurers at the least convenient possible moment.

These are matters of the lease and of the regulations in force: they are settled with your legal advisers. What the assessment brings is the element without which the allocation stays theoretical — a priced inventory, item by item, of what actually exists in the unit, with the reinstatement cost of each component. Once that document is on the table, the split between policies stops being a conversation about principles.

5. The shopping centre and the mall unit

As soon as the unit sits inside a wider scheme — shopping centre, mall, retail park, mixed-use building — a third party enters the equation: the owner of the scheme, who insures the envelope of the building and the common parts (structure, roof, façades, mall, car parks, shared plant). Each tenant then insures its own unit and its own fit-out.

• The rules of the scheme often impose their own insurance obligations — the nature of the cover required, waivers of subrogation, evidence to be produced. Those stipulations are read before the sums insured are set, not after: they sometimes determine who declares what, irrespective of what the parties would have chosen for themselves.
• The unit/common-parts boundary has to be written down — how far does the unit go? Do the mall frontage, the shopfront, the technical ceiling and the capped services belong to the envelope or to the tenant? Without a clear contractual answer, the loss decides it for the parties.
• A loss in a mall rarely stops at one unit — smoke, water, services cut off, the mall closed: shops that are physically intact can end up unusable. It is a textbook case where business interruption cover matters as much as the material damage sum insured.

On out-of-town assets and retail parks the logic is close but the scale changes: standalone buildings, extensive roads and car parking, high-level totems, substantial stockrooms. All of these are works to be captured in the owner's sum insured, and none of them shows up where the declaration reads simply “retail floor area”.

6. Business interruption and loss of rent: the cost of time

A retail loss destroys two things: property and a trade. The landlord stops receiving rent for as long as the unit is unusable; the operator stops generating turnover while continuing to carry fixed costs, wages and, often, instalments. Loss of rent and business interruption cover address that head of loss — provided they have been calibrated on real figures and over a coherent indemnity period.

The methodological point here is not to confuse the duration of the works with the duration of the loss. A retail unit may well be rebuilt quickly; rebuilding the footfall and the concept takes its own time. Time to redo the fit-out after the shell, to restock, to re-hire, to bring back customers who have meanwhile formed other habits and who, in a competitive pitch, have shifted to the fascia opposite. An indemnity period set on the construction programme alone leaves the whole ramp-up phase uncovered — the phase where trading has restarted without having recovered its former level.

7. The average clause applied to retail

The average clause is a standard mechanism of material damage policies: where the declared sum insured is lower than the real value of the property at the date of loss, the settlement is reduced in the same proportion — including on a partial loss. A fire confined to the stockroom, water damage across part of the shop: the settlement is pared back pro rata to the under-declaration, and the balance stays with the insured. In retail it operates on both fronts — on the shell for the landlord, on the fit-out for the tenant. The routes into underinsurance are always the same.

• The concept fully refurbished and never redeclared — the store has been rebuilt to the fascia's current charter, but the fit-out sum insured is still the one from opening day.
• The extension into the stockroom, or a mezzanine created — built floor area appears without the policy ever hearing about it.
• The high-specification shopfront rebuilt — window, façade cladding, shutter: an expensive and highly exposed item, routinely absent from the sums insured.
• Air conditioning and signage forgotten — two installations nobody instinctively attaches to a heading, and everybody assumes are covered.
• The sum inherited from the previous operator — the unit changed hands, the policy was taken over as it stood, and the figure describes a shop that no longer exists.

The opposite trap exists too: insuring the unit on its market value, pitch and yield included, means paying a premium every year on a figure the insurer will never settle — the indemnity remains capped at the actual loss. In both directions, only a calculated sum insured protects the settlement and the premium at the same time. The precise operation of these mechanisms depends on the wording of each policy, and is checked contract in hand; the general trap is set out in our article on underinsurance and the proportional rule.

8. What material damage cover does not reach: the goodwill

One confusion comes back constantly: between the value of the business and the sum insured. The goodwill — customer base, footfall, leasehold interest, the trading name as a mark of attachment — is a set of intangible elements. It is sold, it is charged, it is valued; but it is not rebuilt like a wall, and it is not insurable property under material damage cover. It is business interruption cover that deals with the economic consequences of the loss on the trade, not the material damage sum insured.

The distinction has a direct practical consequence: the price at which a business changes hands bears no relation to the figure to be declared. Of the three components of a business — intangibles, equipment and fit-out, stock — only the last two enter a material damage policy, and under separate headings.

9. The RICS method: the cost approach applied to a retail unit

The RICS Red Book recognises insurance value as a basis distinct from market value; the corresponding technical route is the cost approach. On a retail unit, the instruction run by our RICS-certified experts covers:

• Inspection and measured survey of the unit — sales area, stockroom, back-of-house, mezzanines, sanitary accommodation, façade and window frontage, access and plant areas: nothing is left outside the perimeter.
• Inventory of the fit-out — an item-by-item schedule of what the operator has installed, with description, specification level and condition; this is the document that makes the landlord/tenant allocation possible, and it also serves as evidence of existence after a loss.
• Costing as new by component — reinstatement cost of the shell and reinstatement cost of the fit-out, broken down by item, with professional fees, debris removal and compliance included, by reference to costs observed on comparable works.
• Depreciation by component — reasoned deductions to deliver the “less depreciation” reading where the policy requires it: the structure of a unit does not age at the pace of feature lighting or display joinery.
• Cross-reading of lease against policy — the contractual definitions (building, fit-out, improvements, contents) set against the ownership split arising from the lease, so that every work is attached to the right heading, with no duplication and no gap.

The report is a private valuation. It is documented and verifiable line by line — at inception to set the sums insured, and after a loss to inform the discussion on the settlement. It does not bind the insurer, and it is not a substitute for the policy wording: what it does is replace an unsupported figure with a reasoned one that both sides can follow.

10. When to have the sums insured refreshed

• On taking a lease or on a change of operator — the natural moment to replace a figure carried over from the previous occupier with a calculated one.
• After a concept refurbishment or any works — a rebuilt shopfront, a full refit, an extension into the stockroom, a mezzanine created: every undeclared investment widens the underinsurance.
• On lease renewal or a change of insurer — the opportunity to check that the shell/fit-out/contents split still matches the contractual reality.
• When construction and fitting-out costs have moved appreciably — materials, labour and standards make reinstatement more expensive independently of the property market; a periodic review, at a sensible cadence, is called for.
• For a landlord holding several units — the assessment establishes a consistent basis across the portfolio rather than an accumulation of unrelated figures.

The report sets out, on a documented and traceable basis: the description and measured survey of the unit, the inventory of the fit-out, the reinstatement cost of the fabric broken down by component (structure, façade and shopfront, services, stockroom, fees, debris removal, compliance), the reinstatement cost of the fit-out, the depreciation analysis by component, and the figures to declare under the contractual basis of each policy. Dated, signed and compliant with Red Book standards, it is documented and verifiable line by line.

ReaConsult fees start at 3,500 MAD excl. tax; a retail unit is quoted case by case according to floor area, the nature of the trade and the density of fit-out to be inventoried. Firm quote within 24 hours, a report compliant with Red Book standards in 5 to 8 days, 48-72 hours on the express service. ReaConsult has been operating since 2019, with more than 5,000 valuations completed, offices in 6 cities and a rating of 4.9/5 across 47 reviews.

Note:this article sets out a valuation methodology compliant with RICS standards (Red Book, cost approach). The average clause is a standard insurance mechanism whose application depends on the wording of each policy. Commercial lease rules and the fate of tenant improvements at the end of the term are governed by the contract and by the regulations in force: refer to your lease, your policy and your own advisers. A private valuation informs the placing of cover and an arm's-length negotiation. To instruct us, see our contact page or the property blog.