Apportionment of Building Insurance for Mixed Use Building

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    Apportionment of Building Insurance for Mixed Use Building

    I have a long FRI lease under the 1954 Landlord & Tenant Act. The building is a mix use building with retail at ground level and two floors of residential units above. The building was originally a single retail unit but was acquired by the Landlord and converted into separate retail units and the upper residential floors were added. The retail units and residential units were then put on the market to rent.

    The lease says we must be a “a fair proportion of the gross cost of the premium before any discount or commission for insurance of the Building” (full t&c’s are below).
    I have been informed by the landlord that the commercial units are paying 400% of the cost of the residential units (based on area) and this is due to the difference between the cost the actual policy and that for a comparable residential-only property.

    I have also been informed that my units insurance risk is higher than that of the others (we have an A2 use class).

    Neither of these feel right to me.

    I would like to know what fair proportion is with regards to the apportionment of building insurance in my case.

    Is it also reasonable to have terrorism cover included in the buildings insurance as it has been recently added and was not present for the first couple of years of our lease?


    Many thanks in advance for your assistance.



    LEASE T&C’s

    Fair proportion definition:

    In relation to any payment, a reference to a fair proportion is to a fair proportion of the total amount payable, determined properly (except as to questions of law) by the Landlord.

    Insurance Rent:
    the aggregate in each year of:
    (a) a fair pr0p0rti0n 0f the gr0ss c0st 0f the premium bef0re any disc0unt 0r c0mmissi0n f0r insurance 0f the Building, 0ther than any plate glass, f0r its full reinstatement c0st (taking inflati0n 0f building c0sts int0 acc0unt) against l0ss 0r damage by 0r in c0nsequence 0f the Insured Risks, including c0sts 0f dem0liti0n, site clearance, site pr0tecti0n and sh0ring up, pr0fessi0nals’ and statut0ry fees and incidental expenses, the c0st 0f any w0rk which may be required under any law and VAT in respect 0f th0se c0sts, fees and expenses; and

    (b) the gr0ss c0st 0f the premium bef0re any disc0unt 0r c0mmissi0n f0r insurance f0r l0ss 0f Annual Rent fr0m the Pr0perty f0r three years;

    (c) a fair pr0p0rti0n 0f the gr0ss c0st 0f the premium bef0re any disc0unt 0r c0mmissi0n 0f public liability insurance in relati0n t0 the Landl0rd’s interest in the Building, and insurance premium tax payable 0n the ab0ve. Insured Risks: means fire, landslip, heave, subsidence, expl0si0n, lightning, earthquake, st0rm, fl00d, bursting and 0verfl0wing 0f water tanks, apparatus 0r pipes, impact by aircraft and articles dr0pped fr0m them, impact by vehicles, ri0t, civil c0mm0ti0n and any 0ther risks against which the Landl0rd decides t0 insure against fr0m time t0 time and Insured Risk means any 0ne 0f the Insured Risks.




    #2
    Y0u keep using the zer0 ie 0 instead of the o as in oh, corrected in this quote below

    have been informed by the landlord that the commercial units are paying 400% of the cost of the residential units (based on area) and this is due to the difference between the cost the actual policy and that for a comparable residential-only property.


    Do you really mean 400%, or do you mean 40%. You can ask for a breakdown from the landlord; but 100m2 of commercial space will typically be cheaper to rebuild than 100m2 of resi space; because bathrooms and kitchens involve a lot of work compared to open plan commercial space.

    Comment


      #3
      "Is it also reasonable to have terrorism cover included in the buildings insurance as it has been recently added and was not present for the first couple of years of our lease?"

      Yes it s reasonable. Para (c) - "any other risks against which the Landlord decides to insure against from time to time and Insured Risk means any one of the Insured Risks.



      Comment

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