Other landlord for commercial lease requires tenant to insure building against rebuilding.

[awkwardQ]

landlord for commercial lease requires tenant to insure building against rebuilding costs.


Hi

I just have a quick question.

Someone signs a commercial lease thinking that the only insurance that was needed was normal tenant cover. Public liability and contents insurance. The landlord wanted a copy of the insurance policy before the lease was signed and this was given to him. The insurance was for public liability and contents, and the landlord didn't note any problems.

Then after a period of several months the landlord turns around and says that the tenant is responsible for insuring the building against rebuilding costs. The tenant can't get insurance for rebuilding costs, so the landlord got the insurance and he expects the tenant to pay. The bill is 800 Euros or so, which is just under a months rent.


Is this fair? Does the tenant have to pay this additional insurance?


Is it unusual for a tenant to have to insure the building against rebuilding costs?

 

[NHG]

You can't insure something that you don't own, the landlord must pay this insurance.

Thats why a tenant insures his/her own contents.

 

[awkwardQ]

thanks for that.

There is a clause in the lease which says that 'The tenant shall be responsible for buildings insurance on the premises'

But this isn't possible for the reason you noted. So the tenant got the public liability and contents insurance and forwarded that policy onto the landlord, and he appeared to accept it. Four months later he now says that the insurance isn't good enough and the tenant must pay the extra money.

The tenant also discussed this with the landlord before signing the lease, and this idea of buildings insurance was never mentioned.


The tenant has asked the landlord to reconsider given the reasons above (mainly the acceptance of the landlord of the original insurance policy for four months) but the landlord has refused. He's prepared to add the insurance onto the monthly rent.

The tenant has not seen the extra insurance or a policy document, he's just received a request to pay the 800 Euros.

 

[Towger]

As per the other thread on Rates, this is fairly standard and your solicitor should have pointed it out before signing the lease.

 

[Neg Covenant]

It is standard for the Tenant to have to contribute towards buildings insurance in a shared building and to have to pay for all of it in a stand-alone building.

Considering the tenant is the most likely person to cause damage to the building, the tenant should be happy the insurance is in place and should be happy to pay for same.

Did the tenant read the lease before he signed it I wonder? The difference from the rates issue is that this is in the tenant's interest and was set out in the document they signed.

 

[Claimsman]

You can't insure something that you don't own, the landlord must pay this insurance.

Thats why a tenant insures his/her own contents.

This is not correct. You can insure something that you don't own. In order to insure something, there must be, amongst other things, an insurable interest.Insurable interest arises from a financial relationship recognised at law between the insured and the subject matter of the insurance. This is not the same as ownership. When there is a leasehold agreement that states that the tenant must insure the buildings against certain perils and must repair the building if it is damaged by these perils, then this creates the insurable interest.

Most leasehold agreements have the landlord take out the policy in his/her own name and the tenant pays him/her the premium. However, it is not unusal for the lease to stipulate that the tenant is responsible for the building and also to take out the policy. Either way, the tenant ends up paying the premium.

Occassionally, even where the tenant does not have to take out building insurance, he may still do so in case he has a concern that the landlord is in breach of the lease and has not effected building insurance. In such instances, this contigent insurance will operate.....but this is not common and somewhat complicated.