Charging Commercial Tenant for Insurance

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    Charging Commercial Tenant for Insurance

    What is the standard for requesting payment from a commercial tenant for property insurance premiums, simply a letter or a formal invoice? Secondly, should this include the IPT.

    The lease states the following under tenant obligations:

    To pay to the Landlords within 14 days of written demand a sum equal to:

    - The amount paid or payable by the Landlords in respect of effecting and maintaining Property Insurance

    Thanks in advance.

    #2
    I once took a lease on Business Premises The lease said *I had to pay the insurance,. The previous tenant was paying 250 pounds a year My Insurance was billed at over 1000 pounds. I refused to pay. It turned out that with business leases in the lease the insurance is often described as Rent, So the landlord can send in the Bailiffs' the day after the Insurance is not paid.

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      #3
      Just send an invoice with the details; you should give your tenants a copy of the insurance policy as they will need to comply with its conditions and if they haven't seen it then in the event of a claim they cannot be held responsible.
      The advice I give should not be construed as a definitive answer, and is without prejudice or liability. You are advised to consult a specialist solicitor or other person of equal legal standing.

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        #4
        Payment of the insurance premium under the lease is amongst the thorniest of issues between landlord and tenant.

        A letter or invoice will suffice. The premium includes the IPT.. To be on the safe side, all demands for payment of sums due under a lease should be made by the landlord or the landlord’s agents on headed notepaper and sent to the current tenant and if there is more than one tenant, to all.

        A copy of the policy or the insurer's summary of cover should be provided to the tenant. the tenant will want to check that what is insured is per the lease, also that the premium demanded is correct.

        With commercial property, there is no obligation to obtain lowest premium. Provided the premium is legitimate, there is no obligation for the premium to be reasonable.

        Depending upon the wording in the lease, it may be necessary for the tenant's interest to be noted on the policy. To be able to enforce payment of insurance rent from their tenants, landlords must follow insurance covenants to the letter.

        The policy holder is the insured so if the landlord is the policy holder then the insurer's requirements (if any) should be communicated by the landlord to the tenant. To expect the tenant to comply with the insurer's requirements simply by providing the tenant with a copy of the policy or summary is not enough.

        Unless otherwise stated in the lease, the landlord's obligation to insure is not entered into for the benefit of the Tenant.

        Under the CRAR legislation, (England and Wales), an enforcement agent (formerly known as bailiff) can only recover the rent actual, not any other payments (eg, insurance premium, service charge) described as rent under the lease.

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          #5
          We insure our own buildings - we do not insure anything the tenant brings into them and they must obtain his own insurance for loss and loss of profit. May be a bit unusual but saves a lot of headaches!
          Unshackled by the chains of idle vanity, A modest manatee, that's me

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            #6
            Leases will differ in respect of what perils the landlord is entitled to insure for, but the most important issue is to insure for an adequate amount. The cost of Building work has literally gone through the work as there are fewer people working and a lot of demand for builders' services so that even if the insurers have increased the sum insured by indexlinking it may well not be sufficient. Accordingly it is recommended to have a revaluation prepared every few years. If the insured has had a proper revaluation within the last three years and insured in accordance with its recommendations, insurers will not cite underinsurance even if the sum covered is in fact inadequate. With commercial cover, loss of rent should be added wither for 24 or 36 months. With redidential policies it is commonplace to have loss of rent/alternative accommodation included at 20 or 25% of the sum insured.

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              #7
              "With commercial cover, loss of rent should be added wither (sic) for 24 or 36 months."

              For clarification, insurance cover for loss of rent is nothing to do with the tenant not paying the rent. It applies where the property is damaged or destroyed yet the tenant remains liable to pay the rent . Rather than expect the tenant to pay the rent regardless, the cover enables the landlord to claim the rent from the insurers for the duration of the works to repair or rebuild the property. Most leases nowadays entitle the landlord or the tenant to terminate the lease in the event the works take longer than the period of the insured rent.

              ----

              With listed buildings, it is estimated that around 75% of buildings are underinsured.

              Comment


                #8
                Originally posted by rentreviewspecialist View Post
                For clarification, insurance cover for loss of rent is nothing to do with the tenant not paying the rent. It applies where the property is damaged or destroyed yet the tenant remains liable to pay the rent . Rather than expect the tenant to pay the rent regardless, the cover enables the landlord to claim the rent from the insurers for the duration of the works to repair or rebuild the property. Most leases nowadays entitle the landlord or the tenant to terminate the lease in the event the works take longer than the period of the insured rent.
                Important to make sure the lease has a rent abatement clause otherwise the insurer will not pay up unless the tenant fails to pay.

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                  #9
                  rentreviewspecialist,

                  Great answer thank you. The lease does state that the landlord should make reasonable endeavours to have the interest of the tenant noted on the insurance policy which I didn't do. So hopefully this will not be an issue.

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                    #10
                    generally speaking nowadays the policy wording will say that tenants and mortgagees having an interest in cover will automatically have an interest in the insurance in the event of a claim. Unless you have a landlord who is impecunious or disorganised the only real benefit of having your interest noted as a tenant is to be ware cover has lapsed if for some reason the landlord becomes insolvent or otherwise fails to pay the premium

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