Buildings Insurance – What Our Tenants Need To Know
We are posting this information about “Buildings Insurance” mainly for the benefit of our Tenants (and any prospective Tenants), so that they clearly understand why we – as responsible Landlords – require them to insure any commercial premises and/or residential property they may occupy or wish to lease.
In this review, we hope to make clear the following points:
1) What is the Buildings Insurance there for (and what is it not there for)?
If you are a Tenant of our’s and require a copy of the Buildings Insurance policy that we put in place on your behalf each year, please visit our webpage here to download a copy.
PLEASE NOTE – you will need your password to access the webpage’s content!
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1) What is the Buildings Insurance there for?
When Leasing a property to a Tenant, most Landlords will want to ensure that their property (and investment) is covered against any accident or any type of damage, either directly as a result of the Tenant AND/OR their customers AND/OR by their trade. As such, while there is no Lawful requirement for UK Landlords to insure their property/building, we expressly make a point of insuring all our property.
This is usually done at the expense of the Tenant. Why? Tenants must bear in mind that every trade (or type of business) is associated with a different kind of risk. Thus, depending on a Tenant’s trade (or business), the Tenant will incur a “Buildings Insurance Premium” (BIP) that adequately reflects the amount of risk involved in their line of business (which they conduct at our premises). For example, most MOT centers usually have very high Buildings Insurance Premiums due to high risk of fire and potential injury or damage from any industrial machinery kept on site. On the other hand, most offices usually have low BIPs. Either way, Buildings Insurance protects both the Landlord and Tenant from most eventualities that could arise from the trade (or business) that the Tenant engages in while leasing their premises from us.
As we predominantly deal with commercial properties, we ensure that we use “Fully Repairing and Insuring” (FRI) Leases when Leasing to any commercial Tenants. While an FRI Lease will ensure that we (the Landlord) have a ‘Duty of Care’ toward our Tenant by ensuring that they are allowed ‘quite enjoyment’ of the Leased property for the purposes of their trade during their Tenure there, the FRI Lease also specifically requires the Tenant to maintain the property they are Leasing from us and, thus, adequately look after it during their Tenure there. In other words, the Tenant will need to continually keep a watchful eye on the extents of the property they Lease from us in order to make sure that it remains in good and substantial repair at all times.
It should be noted that… If the Tenant fails – for any reason – to maintain the property they have Leased from us and, thus, the property falls into state of disrepair, the Tenant would not simply be able to claim the cost of remedying any respective dilapidation on the Buildings Insurance Policy. This is because the dilapidation would be directly due to a “Breach of Contract” i.e. it occurred because of a Tenant’s negligence, and, thus, the Tenant would need to remedy any of these dilapidations at their own expense.
For example, if the Tenant fails to inspect obvious matters (such as making sure that all ‘guttering’/’drainage’/’rain-water goods’ remain unblocked and free-flowing at all times, so as to ensure that all rain water/run-off water/soiled water flows away effectively, as well as the drains remain unblocked) and resulting damage occurs (like the drains become blocked and flooding is caused), the Tenant will usually need to repair the damage caused as a result of their own negligence (such as unblock the drains at their own expense). Also, if there is any resulting damage to the property from this negligence (in this instance, water damage to the fixtures, fittings, flooring, walls, etc… that belong to the Building itself), then a claim might against the Buildings Insurance might be possible in order to remedy this damage (though this will need to be determined by the Loss Adjustor).
Also… If there are – say – some freak weather conditions (such as the outside temperature suddenly drops to -20 degrees Centigrade overnight) and subsequent damage to the Building results (such as water pipes burst and/or drains freeze and then crack, allowing water to leak into the property and subsequently cause water damage to internal fixtures, fittings, flooring, walls, etc), then a claim against the Buildings Insurance might also be possible, if the Loss Adjustor concedes.
Another instance where a claim might be made could be… If our Tenant locks up the Leased property for the evening and goes home, making sure it is secure and sound before departing. However, when they come back the following morning they find that the building’s shop front glazing has been broken, they might be able to make a claim on the Buildings Insurance to remove the glass (if cracked and damaged) and board up the window, making the property safe and secure… As well as claim the cost of repairing the glazing itself. Again, this will usually be at the descretion of the Loss Adjustor.
It should be noted that, in all ‘allowable’ claims, one can only ever claim the cost to replace exactly like-for-like. That is to say, in the unlikely event that your roof is blown off during strong hurricane force winds, you can only replace the missing roof with one of exactly the same construction and building materials as the one that was there before i.e. you cannot claim for a new improved roof with more insulation, better tiling, etc… However, if some of the building materials are no longer available, then you will be able to replace these with similar materials.
Other things the Buildings Insurance does not cover is for loss of or damage to Tenant’s stock, loss of any machinery or any contents stored on site, etc… Nor does it cover the Tenant for loss of trade. All matters that are not part of the demised premises (or designated Building) will need to be covered under a separate insurance policy, which our Tenants will need to ensure is in place at their discretion.
Also, the Buildings Insurance does not cover natural wear-and-tear of the building, fixtures or fittings (or any other part) associated with it… Which should be fairly obvious. You don’t expect your car insurance to cover the natural wear-and-tear that your car undergoes as you use it… Likewise, neither does Buildings Insurance cover the natural wear-and-tear of the building, fixtures or fittings as you use it.
Essentially, we see Buildings Insurance as part of the Tenant’s obligation to maintain the building they are Leasing from us, by ensuring it is protected against most types of unforeseen risk (resulting directly from their trade or otherwise) that might cause damage to the Building during their Tenure there.
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2) Why do we require our Tenants to take out Buildings Insurance?
As our Tenants are the ones who are using the property to trade from (which includes their trade’s associated risks), they need to pay for the BIP themselves. An invoice for this Premium is usually issued every April.
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3) Procedure for initiating a claim against the Buildings Insurance
i. All Tenants should call us (the Landlord) immediately upon noting any damage to the Building.
If the Tenant feels that a claim on the Buildings Insurance might be warranted, then – before a claim can be initiated – we (the Landlord) will need come and inspect the damage to the Building in order to assess whether a claim can, in fact, be made (or not).
In the unlikely event that our offices are closed when the Building becomes/is damaged in anyway… You should contact our Insurance Broker directly, citing your policy number, and explain to them the circumstance(s) under which the damage occurred. They will then advise you as to whether a claim can (or cannot) be made and how to make one.
ii. In all instances where an allowable Buildings Insurance claim might come to over £1,000, our Tenant(s) will have to acquire three independent quotes from builders/contractors/tradesmen to repair/replace the damage in an exact like-for-like manner.
PLEASE NOTE – you CANNOT and SHOULD NOT claim for improvements or betterment of the property.
iii. In emergencies, where we (the Landlord) cannot be reached, the Tenant may call the Insurance Broker’s hotline (click here and use the telephone number provided near the bottom of the page) to get help with arranging a claim on any and all claimable repairs. Despite this, our Tenants should duly note that… The cost of all remidial works will usually have to be covered by the Tenants themselves at first, until they are deemed to be recoverable against the Buildings Insurance by the Loss Adjustors. Just because the insurance company’s team (who provides the Buildings Insurance) has been instructed to help make any and all necessary repairs on the Tenant’s behalf, it DOES NOT mean that the repairs will automatically be covered under the Buildings Insurance.
iv. When we (the Landlord) come to inspect the damage, we will use every available means to correctly ascertain how any damage was caused. During this time we will also examine the extent and severity of the damage. During our inspection, we will need to take photographs, testimonies and detailed notes. All Tenant’s should note that we (the Landlord) will not tolerate (or be party to) any type of over-exaggeration (relating to any and all damage that the building may have sustained for whatever the reason), especially if the aim of the over-exaggeration is just to make a larger claim than is reasonably needed. If we suspect anyone of doing this, we will immediately pass the matter over to our Insurance Brokers and ask them to mediate.
v. In the event of a dispute between Landlord and Tenant as to how the damage was caused OR how to remedy any damage sustained by the Building, we will immediately pass the matter over to our Insurance Broker who will appoint an independent Claims Assessor/Loss Adjuster to inspect the building/property in question. The verdict of the Claims Assessor/Loss Adjuster is usually final.
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4) Other important points to note about Buildings Insurance
i. In all our FRI Leases we (the Landlord) reserve the right to appoint our own Insurance Brokers and, thus, our own insurance. This allows us to make sure that we can implement the proper type of insurance cover needed to properly protect our properties and ensure that our Tenants have “quiet enjoyment” of the property during their Tenure there.
ii. In all our Leases we (the Landlord) make provision to be able to claim back the cost of the Buildings Insurance from our Tenants.
iii. Because we (the Landlord) have a Buildings Insurance block policy, which insures all our properties together, the Buildings Insurance price is usually much better than any Tenant would be able to get as an independent trader.
iv. Each year we (the Landlord) do our best to reduce the cost of the BIP that our Tenants pay out. Saying that, we need to balance this against ensuring that the cover is not marginalized in anyway, thus, still providing both our Tenants and ourselves with cover that effectively does the job it is intended to do.
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PLEASE NOTE – we currently choose to use Pi-Property Insurance as our Insurance Brokers because they offer competitive rates and provide us with suitable insurance coverage and advice, and (from our perspective) have noted that they continually deal with all the claims made effectively and fairly.