Insurance Rent

[VVH]

Hi All

I came across this forum whilst looking for advice and it seems that some great advice is shared so this is my first post.

I run a pretty new company and are just about to move into our first new commercial premises. We are about to sign the lease but in reading it, it mentions that the tenant has to, on demand, pay Insurance Rent to the landlord.

Excuse my ignorance but what is Insrance Rent exactly?

Thanks for you helpin advance.

 

[VVH]

Sorry, just to add, I now know the Insrance Rent is a premium that is passed onto a tenant. Is this normally factored into the rent or maintenance bill, or is this another bill that appears of unknown value?

Thanks again

 

[Anonymouse72]

not something i've heard of, a quick search brings up this for rent insurance " insurance against loss to a landlord because of suspension of rents resulting from specified damage to rented premises", perhaps something different? also this on landlordzone which might be more relevant?

it's definitely not something we pay.

 

[VVH]

Thanks anonymous,
I think that that is part of the insurance but I have since learnt that they can, if I sign the lease, make the tenant pay the insurance premium which apparently is quite common in commercial leases.

Going to fire it back to them and see what they say.

Thanks for your help

 

[fairdealworld]

Bit puzzling. Are you sure this isn't buildings insurance? It is common (even usual) in commercial leases for the landlord to be responsible for insuring the building (while the tenant is responsible for business insurance i.e. contents, staff, public liability, and some sort of business continuation insurance is usually built into that i.e. you are insured against being unable to trade for a certain period of time after fire or flood etc leaves you without anywhere to trade from). But it is built into the lease that the landlord can reclaim the cost of the buildings insurance from the tenant or tenants.

It is logical that the landlord arranges the buildings insurance as the landlord owns the building + in many cases different parts of the building are leased out to different businesses who might or might not arrange their own buildings insurance. So there is an advantage - but also a couple of catches - in the landlord arranging this insurance as it means the building definitely is insured. The catch is that landlords do indeed 'demand' the insurance monies at fairly short notice and you've no means of knowing in advance how much it is going to be. The other catch is that some landlords have no motivation to keep the cost of buildings insurance under control as they are arranging it rather than paying for it. My own landlord is an individual and though he has many commercial properties if there is an issue you get to talk to the person making the decisions. After a bit of pleasant but firm pressure from me a couple of years back my landlord agreed to do some comparisons each year rather than automatically accepting the quote from the company he'd used in the past. Unfortunately if you lease premises from big property holding companies many are simply uninterested in trying to keep (your) costs down. The row of shops/other businesses opposite to my own have this problem.

 

[VVH]

Hi fairdealworld

Thanks for the very informative and helpful post.

Your second part is exactly what they are saying, I believe, in my lease that they will organise the insurance for the building.

In your case, as you said you had to have a word with your landlord about the cost, I assume you get a bill for the insurance premium? I would imagine this is annually?

 

[fairdealworld]

Yes you get a bill from the landlord and yes it is annually.

N.B. The word 'demand' is used on the bill. I just mention this as it once really scared a member of my staff who was entrusted with minding the shop in my absence and opening the mail as part of her duties. She was unfamiliar with the concept of a 'demand' rather than an ordinary invoice that we'd get from our suppliers and confused it with the concept of a 'final demand' and contacted me in a terrible panic thinking that we were about to be taken to Court or something when my landlord was merely notifying me of the amount we'd have to pay. These days my landlord sends the 'demand' by email and I just print it out for my business records.

 

[Anonymouse72]

we have our own insurance for contents/machines/etc. & we pay a pro-rata portion of the buildings insurance on our unit on a trading estate, it's never been referred to as insurance rent though. the admin co. for our landlord bill us once a year, usually at least 6 months after the insurace was due (& presumably paid by our landlord). no idea why such a delay, it was nearly 12 months late one year!

 

[Newchodge]

I have no idea what this is but, if you reverse the phrase and it is rent insurance, would that insure the landlord if you fail to pay the rent, so his insurers pay your rent and chase you for it?

 

[rach88]

Yes, as fairdealworld says this refers to buildings insurance which the landlord pays and recharges to the tenant. I believe they call it "Insurance Rent" because if it is reserved as rent, it makes it easier for the landlord to take back possession of the property (forfeit) if you fail to pay it...

It's always a good idea to ask for the last 3 years figures for insurance (and service charge if applicable) to give you an idea of the likely costs in future years.