Landlords commercial property insurance sits on top of a document the insurer never sees. The lease decides who repairs, who insures, who pays and what happens to the rent while the building is unusable, and the policy is bought to fit it. A landlord who buys cover first and reads the lease afterwards usually finds they have insured something the tenant was obliged to carry, or failed to insure something they promised.
The four clauses to read before you buy
The insurance covenant: who insures, against what, for how much, and whose interests are noted. The repair covenant: who is responsible for what, and whether it is full repairing. The rent suspension clause: whether rent stops while the building is unusable, and for how long. And the reinstatement clause: what happens if the building is damaged beyond economic repair. Those four decide the shape of the policy.
Recovering the premium
On a full repairing and insuring lease the landlord insures and recharges the premium to the tenant, usually as a separate item from rent. Where there are several tenants the recharge is apportioned, commonly by floor area. Tenants can and do query it, so keeping the schedule and the invoice and showing the apportionment is worth doing as a matter of routine.
The tenant's trade is the rating factor
A unit occupied by a solicitor, a hairdresser, a takeaway, a joinery workshop and a car repairer are five different premiums in the same building. Cooking, hot work, spraying, dust, chemicals and late hours all move the price and some move whether an insurer will write it. Notify a change of tenant, because the policy was priced for the last one.
Loss of rent over the right period
Rent suspension means the landlord's income stops while the tenant's obligation does. Commercial rebuilds are slow, so a twelve month indemnity period is often too short; two or three years is common. Size it against the rent roll and against a realistic programme including planning and fit out, not against the default on a form.
Questions people ask about landlords commercial property insurance
Who insures a commercial property, landlord or tenant?
Usually the landlord, recovering the premium through the lease. Some leases place the obligation on the tenant. The lease is definitive and should be read first.
Can I recharge the insurance premium?
Where the lease allows it, which is usual on full repairing and insuring terms. Show the apportionment and keep the schedule, because tenants query it.
Does the tenant's business type matter?
It is the main rating factor. A change of trade is a change of risk and most policies require you to notify it.
How long should loss of rent run for?
Long enough for a realistic rebuild including planning and fit out, which on commercial property is frequently two or three years rather than one.