Insurance contribution from tenant

[sks]

Hi, we are looking to grant a new commercial lease and the building is shared with another commercial tenant.
Both tenants are to contribute to the building insurance premium.
The new tenant is a food business and hence the total premium is coming in at 4 times the current policy.
Just wondering how we would split the premium between 2 tenants going forward?
The existing tenant pays 60%, however, it would be unfair for them to pay 60% of the higher premium now and in future, for no fault of their own.
The insurance cannot be paid separately by each tenant as it is a joint building and title.
How should we handle this going forward or would it be preferable to find another tenant?

 

[WaveJumper]

Hopefully you are taking proper legal advice in drawing up your lease? normal to invoice tenants separately for insurance contributions so I would have thought pretty easy to split the cost however you want as long as you can justify if challenged.

 

[sks]

Hi, yes we are.
This is a little complex because:
Current premium for the 2 shops is £1,000
Current tenant pays 70% of this
New tenant was to pay 30%
Premium with new food trade - £5,000
So it will be unfair for current tenant to be expected to pay 70% of £5,000 as this increase is only due to the new tenant business type
Not sure how we would split going forward, as the current tenant may feel he is paying more every year.

 

[bodgitt&scarperLTD]

Hi, yes we are.
This is a little complex because:
Current premium for the 2 shops is £1,000
Current tenant pays 70% of this
New tenant was to pay 30%
Premium with new food trade - £5,000
So it will be unfair for current tenant to be expected to pay 70% of £5,000 as this increase is only due to the new tenant business type
Not sure how we would split going forward, as the current tenant may feel he is paying more every year.

You could ask your insurer for a breakdown of the policy loading to help you demonstrate that you’ve split it fairly.

 

[fisicx]

Existing tenant pays £700. New tenant pays £4300.

 

[sks]

Existing tenant pays £700. New tenant pays £4300.

ok thanks

 

[fisicx]

The who reason for the £4000 rise is the change in use. So it seems only fair that the new tenant pays the premium. The original tenant still pays the same.

That being said, there may well have been an increase in the premium anyway so you might need to find out what it would cost without the change of use.

 

[WaveJumper]

Also premium seems rather high as mentioned above I would want a detailed breakdown of why from you current insurer, shop around speak to @Frank the Insurance guy and i would also check to see if anything can be done on site to mitigate the risks which they may be worried about ....get them to visit the site for a walk through.

 

[IanSuth]

Existing tenant pays £700. New tenant pays £4300.

or you get a quote if the type of business had not changed work out the 70% of that and charge existing tenant that and rest to new tenant.

So if like for like quote would have been £1200 (up from £1k last yr) then 1200x0.7=£840 bill to existing tenant

New one pays £5000-840 = £4160

That would be fairest

 

[sks]

or you get a quote if the type of business had not changed work out the 70% of that and charge existing tenant that and rest to new tenant.

So if like for like quote would have been £1200 (up from £1k last yr) then 1200x0.7=£840 bill to existing tenant

New one pays £5000-840 = £4160

That would be fairest

Thank you, that seems fair