Commercial Property Landlord Insurance

Is there such thing to begin with ?

i know for resi- this is very common & cheap.

just wondering is there an equivalent


ps: i do have a bank guarantee from the tenant but i just want to know as commercial landlord what do you do to protect yourself.

 

Yes, very available.
What type of business will the tenant be operating will have an effect on the premium. White collar office single operator = less risk, Large service station = higher risk

 

@KinG3o0o - as @Hosko mentioned, it is available - CGU offer a product.

Generally, you are holding a bond/bank guarantee as well as a director's guarantee/personal guarantee. The necessity of having LL insurance is generally unwarranted unless you have C-grade tenants.

Remember that you have more control over lockouts for failure to pay rent provided you follow the process.

 

ya i have a bank guarantee, just that i have a new tenant, old tenant sold the business. so just looking at options at the moment.. Thanks. prevention is better than cure as they say

 

If the old tenant has sold the business & assigned the lease, then it is not unreasonable that the old tenant still provide the guarantee in addition to the new tenant providing the bank guarantee & director/personal guarantee until the assignee has signed a new lease or some other agreed timeframe.

Has the assignment been completed? What did your solicitor advise?

 

So three things to insure for as a landlord with commercial property (exactly the same as residential),

1. General Building insurance,
2. Public Liability and,
3. Loss of Rent,

In some cases the cost of this can be billed to the tenant under the terms of the lease. No matter what you do, never let the tenant hold the policy in their name/business regardless of how cheap they can get it.

Loss of Rent only covers in the event of the building being unusable not in the event of tenant default. Personally I find the cover for tenant default cost prohibitive, just get bigger/better bonds/guarantee's.

 

Simple answer is yes there is. It's certainly not as readily available or as simple as the cover available for residential properties (which we've done for over 25 years), but there are products available including our Commercial Landlord Insurance Policy (CLIP). It's not my area of expertise but I'm more than happy to send you details if you wish.

 

Hi experts, I have had this concern for some time now and appreciate some insights you may
have and similar.

My retail lease stipulates a 12-month loss of rent and outgoings insurance.
My current insurance underwrite covers loss of rent due to rent default for 26 weeks only.
And my insurance broker told me no other insurers covers rent default for longer than 26 weeks.

Anyone has an insurance product that differs otherwise on the rent default cover period?

 

Who is providing that surety? If it's the tenant, then it needs to be addressed in the bond. If it's on the lessor, then you'll need to satisfy yourself that there's a product in the market which meets your needs.

Yes, it's a risk, but when you weigh up the bank guarantee plus the 26 weeks from the policy, you should have 9+ months covered.

 

Thanks Scott. The insurance premium itself is recoverable outgoing from tenant.
The reality conveyed by my broker appears that no underwriter in the market actually covers rent
default longer than 26 weeks so seems I am stuck. That's why I'd like to find out others'
experience & understanding on this matter over here.

However, I do have a potential lease assignment coming up soon and just wonder if there is
anything implicit from retail lease act that may prohibit me from renegotiating a bond top up
with the incoming tenant?

THanks

 

You keep the outgoing tenants on the hook (ie director's guarantee & bond) for the balance of the lease term (if > 12 months) or new lease with the incoming tenant (if < 12 months remaining).

It's a badly drafted lease clause requiring something not available in the market. You reduce your risk via 3-6 months bond, director's guarantees & the insurance policy.

Good tenant selection & management removes/reduces the risk of default and the need for loss of rent insurance (not loss of rent due to damage or destruction). Our broker advised against it across our portfolio.

 

love reading your replies, always great knowledge and insight into commercial!

 

Hey Scott, mind elaborating why your broker advised aganit it? Is it due to premium consideration
or other reason? ThankS

 

Basically, with good management/planning/strategy, the issue can be avoided/minimised.