What is the danger for a landlord in allowing a tenant to insure the building?
One common issue which arises is where a clause in a lease requires the tenant to insure the building for loss and damage.
We have seen repeated examples of situations in which the actions of the tenant when insuring the building have resulted in significant prejudice to the interests of the landlord.
These have included:
##The tenant insured the building but selected a very large excess;
##There was a non-disclosure by the tenant which allowed the insurer to cancel the policy from inception;
##The tenant, in breach of the terms of the lease, failed to insure the building for full replacement value and did not insure the landlord for loss of rent.
Another issue arose in a recent claim where the tenant was required by the lease to insure the building.
The tenant insured the building in the name of the tenant and the landlord.
The tenant intentionally set fire to the building and because of the way in which the policy had been set up; the insurer was able to deny the claim.
It is much safer from the landlord’s perspective, for the landlord to insure the building and charge the tenant with the premium.
Credit; This article is by Michael White Steadfast Group Limited