Commercial building insurance protects a commercially used property against damage or loss caused by events like burglaries, fire, flood and vandalism. If a building owner occupies the premises themselves, they pay for their building insurance. A building owner renting out their property would need a specific form of coverage called commercial buildings insurance for landlords. In the case of a leased property, who pays for cover?
Rates can be expensive. The cost of a commercial building policy will be based on the cost of the rebuild, the value of the building contents and the level of risk assessed. Premiums will vary depending on the amount of coverage needed. Still, UK businesses can expect to pay from £218 per year at a minimum for a smaller property with a £200,000 rebuild cost.
Even though this kind of insurance will protect property owners from a number of incidents that cause damage, it will not cover every incident. Policies are typically written to cover ‘certain risks’ and details the ones covered in the policy. The insurance will not cover any that are not included in the policy.
Who is responsible for buildings insurance on commercial property?
While there is no legal requirement to obtain buildings insurance, a property owner should invest in a policy to protect their building and investment from things like fire and flood damage. Making sure that a building is adequately insured is ultimately the responsibility of the property owner and not the tenant.
The building owner will need to arrange and set up a commercial building insurance policy if he or she wants to be protected from events that may cause harm or damage to the property. Even if the building is occupied by a paying tenant that leases the property for business purposes, it is still ultimately the owner’s responsibility to obtain the insurance to ensure protection.
While commercial building insurance covers any loss or damage to the property, this does not include the contents. For tenants renting business premises, it would generally be advisable to obtain their own contents insurance to cover business equipment like computers or equipment from theft or damage. Any fixtures or fittings added by the tenant may also need to be insured separately under contents cover; a tenant’s improvements coverage can cover permanent structural changes made by a tenant.
For any personal damage to third parties visiting the property, commercial buildings insurance will also protect landlords against any public liability claims made against them for incidents occurring on their property. This will cover settlement payments, medical expenses, and transportations costs associated with damages, loss, or accidents. Tenants will need their own separate public liability insurance policy to protect them if they are at fault for a similar incident.
Do commercial tenants pay building insurance?
Tenants that are occupying the building for business purposes have no obligation to purchase or maintain a commercial building insurance policy. The responsibility of organising commercial building insurance falls to the owner of the building. However, a tenant may be contractually obligated to reimburse the building owner for the insurance (or a portion of it).
Whether commercial building insurance is held on the property or not, the landlord still has a responsibility to ensure that the property is maintained to a reasonable condition. They are responsible for ensuring the correct operation and repair of things like plumbing, electrics, and heating, along with ensuring that routine maintenance checks are performed in line with any health and safety requirements.
Can a landlord make me pay commercial building insurance?
The payment of commercial building insurance premiums may be passed on to a property tenant, either as part of the monthly payment or as a service charge in addition to the rent. Commercial leases or tenancy agreements usually include clauses that pertain to the maintenance and payment of any necessary insurance premiums.
If you are a tenant required to reimburse the cost of commercial building insurance, you have a right to see proof of coverage and proof that premium payments are being made to the insurer. Your landlord should be able to provide payment receipts and a copy of the commercial building insurance policy as proof of coverage. The insurer sets premium payments, and the landlord is under no obligation to obtain the most competitive policy. As costs are passed directly to the tenant, finding the most economical policy may not be a priority.
Regardless of the cost of premiums, under the terms of the lease agreement, if it is stipulated that payments are the tenant’s responsibility, they will be legally required to pay for the time that they occupy the property.