As a tenant in a commercial building, you will have taken out your own insurance to make sure that your stock is protected and also that you have adequate protection for your staff in respect of your liability towards them. There will be an element of the rent, however, that will be going towards the landlord’s commercial buildings insurance and some people wonder why this is.
A landlord has a lot more responsibility to his tenant and his neighbours than some people might think. He has to take out landlords’ insurance to cover him for personal liability but he also has to make sure that the building is adequately covered in the event that the tenants’ insurance is lacking in any way. If his tenant is injured because of any defect of the building, the landlord is liable and his commercial buildings insurance premium will be partly decided upon by the business which his tenant is carrying out in it, so it is only reasonable that the tenant should bear the cost.
In law, ignorance is no defence and this would apply to any landlord who assumed that his tenant had taken out adequate commercial buildings insurance to cover any eventuality should losses occur. The best way for a landlord to make sure that his property is covered adequately and that the correct amount of personal liability is in place, is for him to do the covering through his own broker or insurance company and pass the cost on to the tenant. If the premium is collected as part of the rent, then there will be no risk that the property is not covered. Also, should the tenant have to leave before the lease is up, due to financial or other problems, the landlord will be able to transfer his policy to cover an empty building, rather than start a policy from scratch. Most policies allow for a certain length of time for the property to be empty anyway, so this gives a breathing space.
As a tenant asked to pay the landlord for commercial buildings insurance you should be pleased that you can participate in the preferential rates that your landlord can probably command. As a tenant, you are likely to be responsible for just one building, but your landlord may have several or even a whole estate of properties. A portfolio like this will almost certainly bring with it a whole raft of special rates that will not be available to the individual insured party and so although it may seem a little draconian to be asked to pay your commercial buildings insurance premium to the landlord, it is in the long run probably very sound financial sense. Also, paying monthly on the rent is an option which might not be afforded to you as an individual or, if offered, it might carry a charge for administration which you won’t have to pay to the landlord. Generally, this is a better system for landlord and tenant alike.