Uninsured damage or loss—leases
Uninsured damage or loss—leases

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

  • Uninsured damage or loss—leases
  • Risk where cover is not available
  • Terrorism
  • Flooding and subsidence
  • Lease code recommendations
  • Drafting considerations
  • List of insured risks
  • Malicious damage
  • Uninsured risks
  • Tenant’s fit-out works
  • More...

In most commercial leases the landlord effects:

  1. building insurance, and

  2. insurance for loss of rent—for the period it estimates it will take to reinstate the premises (commonly three years)

The tenant:

  1. reimburses the landlord's insurance costs, and

  2. the tenant’s repair obligation is qualified to exclude damage by an insured risk

This means that if damage is caused by an insured risk (except to the extent that the insurance may be invalidated by the tenant):

  1. the landlord is obliged to apply the insurance proceeds to repair or reinstate the premises, and

  2. the rent is suspended for the loss of rent period

However, if damage is caused by a risk which has not been insured against:

  1. the tenant may remain liable to repair or reinstate the damage under its general repair obligation, or

  2. there may be confusion over the parties respective repair/reinstatement obligations, and

  3. there will be no suspension of rent

Risk where cover is not available

Most commercial leases contain a long list of insured risks plus a proviso that the landlord is not obliged to effect insurance against a risk where cover is not available in the insurance market or where cover is only available on terms that the landlord considers unreasonable. This means that any listed risk may become an uninsured risk. This is most commonly a problem for damage arising from terrorism, flooding and subsidence.


As terrorist

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