Commercial insurance

Question from Jules updated on 27th June 2016:

We have just bought a commercial property (first one) and have organised and billed the tenant for the building insurance. They've come back and said they already have insurance with another provider. Is it normal for the tenant to have this insurance? Seems a bit strange that we wouldn't hold the policy. Thanks

Our expert Myles Noble responded:

The landlord almost always raises the insurance and the tenant pays it. This is because the landlord wants/needs to ensure the building is covered to a sufficient sum insured and because the landlord holds the insurable interest in the property. The majority of lease agreements will state this.

There are times the tenant may be allowed to arrange the building insurance - for example: because they are part of a wider group and can get insurance at a special rate (eg: chain stores). However, this would have to be agreed to in the lease in the first instance. I would ask to see the tenant's insurance documentation and, ideally, have your insurance broker review this.

Myles Noble is head of claims and earthquake response for Crombie Lockwood. He also holds various advisory board positions in the insurance industry.

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