Same hall, two points of view: the landlord worries about the walls, the tenant worries about the operation inside them. The good news: the two interests don't clash, they complement each other – once the lease and the two insurance policies have been properly aligned.
- Landlord: building cover in their own policy, plus a liability element for damage arising from defects in the building.
- Tenant: own equipment, stock, and fit-out, plus liability for damage caused to the leased property.
- The insurance clauses in the lease: who insures what, who bears what – cheaper when settled in advance.
The landlord's point of view
The landlord's main asset is the building – covering it is a matter for their own property insurance, at a genuine reinstatement value: building value. Alongside that, a liability element is called for: if a defect in the building (a leaking roof, an electrical fault) damages the tenant's property, a compensation claim can come the landlord's way. In a multi-tenant property, well-organised shared rules – who can report a claim, who has access to the main shut-off valve – also speed up claims settlement. Letting out the property can be a use that needs reporting to the insurer.
The tenant's point of view
The tenant's list will be familiar from the who insures what article: own equipment and stock, the tenant's fit-out, off-site equipment – plus the liability element for damage caused to the leased property (lease agreements often require this explicitly). For a tenant, the most important check question is: if there were a fire tomorrow, what would the landlord's insurance cover, and what would be left for me? The answer is almost always more than you'd think at first.
The insurance clauses in the lease
It's worth setting out in writing: who takes out the building cover; which insurance the tenant commits to (property, liability); what to do and who the contact person is when there's a claim; how reinstatement responsibilities are split for the borderline items (shopfront glazing, fit-outs). Where a lender is also in the picture – a loan the landlord has taken out against the property – the question of endorsements also comes up: leased and financed assets. An hour of agreeing things in advance rules out the ugliest source of disputes in a lease relationship for years to come.
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