Landlord Insurance charges on a Commercial Property

[chriscar]

Hi everyone

I wondered if anyone could help me at all?

I am 5.5 years into a 6 year lease on a Commercial Unit and my Landlord has just sent me an invoice for the annual Insurance. I have generally paid £1100-1200 a year for it (which seemed a bit high with my broker stating around £900 was reasonable a few years back). I have today though been given a figure of just north of £1500.00 for the policy for the year.

Obviously I only have 6 months remaining, therefore do not see how I am liable to pay for the full year either?

Additionally, it is actually grouped in with 10 other properties that the Landlord owns. He sent me through an Insurance Schedule which totals £4600.00 for all of the properties. Admittedly, my site is the largest and probably equates to 2 of the Units, therefore I am at a bit of a loss as to how over £1500.00 is being charged?

Can anyone offer me any advice on how best to tackle this? My broker previous said around £900 was about the right cost for the Insurance annually, however this was just a guestimate and I am going back a couple of years. Additionally, no claims have ever been made throughout my occupation.

I don't want to fall out with the landlord, but equally so, feel this looks excessive and I want to know where I stand really.

Many thanks

 

[Lisa Thomas]

What does your lease say?

 

[chriscar]

Thanks for the reply Lisa.

I dont have access to my Lease at present as its with my Solicitor, however what is the general rule of thumb on this? I will of course check the exact wording.

 

[Lisa Thomas]

Sorry to sound sarcastic but the general rule of thumb is whatever the lease states...

...and if parties can't agree they can go to arbitration etc.

I would expect yours to say you should pay two tenths of the cost.

And I would also think you should only be paying for the 6 month period left in occupation so 50% of two tenths which, if my maths is correct, would be £460. Any new tenant would pick up the remaining term, assuming they moved in one day one.

No doubt someone with better knowledge than me will be along shortly to give more specific advice and correct me if I am wrong.

 

[Deleted member 59730]

If it is a group insurance on all the properties the premium could have risen for any number of reasons. Does the amount include any other costs like management fees?

 

[chriscar]

Thanks for the replies and that’s interesting regarding 2/10th’s. I will check it out. I have also noticed that on my last 4 years of invoices he charged me VAT. I didn’t think anything of it, but I have now read somewhere that VAT is not chargeable on insurance? I believe IPT was at 5% at one point.

The Policies shoe cover for the buildings with terrorism cover included (which given its proximity to a military base is standard procedure) and also indemnity cover included at £5,000,000. There are not any other charges.

 

[Scalloway]

I have also noticed that on my last 4 years of invoices he charged me VAT. I didn’t think anything of it, but I have now read somewhere that VAT is not chargeable on insurance?

If you’re charging your customers for providing insurance, even if it is underwritten by an authorised insurer and their charge to you is exempt, your “supply” is liable to VAT and you must charge VAT to your customer.

http://www.vatexchange.co.uk/uncategorised/when-insurance-isnt-insurance-and-is-liable-to-vat/

 

[deniser]

As Lisa says, you need to look to see what your lease says.

The first thing to identify is the proportion that you are meant to paying. And also a proportion of exactly what. And then check whether that ties in with the schedule that has been sent through.

Secondly, a commercial lease does not normally require a landlord to shop around the insurance or for it to be reasonable. It has been even been common practice for the landlord to receive a cashback bonus from the insurer if he puts a large number of properties on one policy so that any discount for the bulk insure effectively lands in the landlord's pocket, not yours.

However, if your solicitor did his job properly at the outset when the lease was negotiated, then he may have put in a provision requiring the insurance cost to be "reasonable". If this is the case then you might be able to argue that your amount is excessive if you can produce comparables by way of alternative quotes.

As for the amount, it can fluctuate from year to year just because the identity of one of your neighbours changes. I know for example that proximity to an antiques shop used the change the amount quite dramatically in the past (probably not so much now). Or because someone else made a claim which affects the policy as a whole.

But you need to get a copy of your lease and have a look a what it says exactly. Feel free to post the wording here and we can take a look at it.