Tenant’s insurance issues—payment
Tenant’s insurance issues—payment

The following Property practice note provides comprehensive and up to date legal information covering:

  • Tenant’s insurance issues—payment
  • Level of cover
  • Commission/discounts
  • Tenant’s proportion of premium
  • Residential—long leases
  • Increase in premium
  • Demand

Level of cover

It is in both parties’ interests for the premises to be adequately insured (particularly for the tenant where the landlord’s obligation is simply to apply insurance monies in reinstating the premises rather than an absolute covenant to reinstate).

The covenant to insure should specify how much cover is required. This is usually the cost of reinstatement. The 'full cost of reinstatement' has been held to cover the cost that might properly be expected to be incurred at the time when reinstatement takes place, as opposed to the cost calculated as at the date on which each annual insurance premium was paid. So the landlord can have regard to the effects of inflation and require the tenant to pay the higher premium (see Gleniffer Finance v Bamar Wood and Products (1978) 37 P & CR 208).

Commission/discounts

Where a landlord covenants to insure, he often places the insurance through an agency that he has with the insurance company. This means that he receives commission, usually in the form of a discounted premium.

A landlord will often require a lease provision confirming he may retain any commission or discount for his own benefit (on the basis that it is only available due to his other insurance arrangements-this is particularly the case for landlords with large property portfolios). A compromise (included in the British Property Federation's standard clauses

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