CIP insurances

Hi there,

For a landlord of a commercial property, are the relevant insurances the same as for residential property?

Just building insurance with public liability?

Is there any other relevant insurance?

I read in an old thread that CGU had insurance for rent default of a commercial tenant...

http://www.cgu.com.au/cgu/cgu/linkA...oducts/CommercialInsurance/landlordsinsurance

Are there any other insurances providers which cover for rent default?

Thanks.
 
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Just building insurance with public liability?

I've seen commercial leases recently that dictate that it is a binding condition on the tenant to hold current public liability and building insurance over the property for the term of the lease. Much like other expenses, it can be written into the contract that the tenant pays the outgoings, including insurance.

You'd probably want to cite evidence that such a policy is held, though, just in case. Could be a condition of occupancy (ie, before handing over the keys), perhaps.
 
could also potentially be a condition of lending from the bank - wouldnt surprise me. they wouldnt want you getting done for no liability and then not being able to pay your loan!
 
CGU had insurance for rent default of a commercial tenant...


Pretty much covered by the 6 or 12 month upfront cash bond, along with the monthly in advance.....but then one can never be too sure about these dodgy Tenants. Sounds like a top idea JIT. Get them to cough up for rent default insurance in case they don't have any money. Brilliant. I'll add that to my list, and their pile.
 
Lol TPFKAD,

Feel free to shoot me down (as the holder of no comm @ all) but the 6-12 month bonds u speak of are common in the fish pool you play (1mill + comm) but in the mum and dad comm (sub 1mill) is less common to have large bonds? When i was enquirying with comm leasing agents in my area they was saying in my price bracket (200-500k) they where leaving 1-2month bonds
 
Hi Ridin-High

My research has shown exactly the same effect with pretty much every term and condition you could name. I'm loving reading the leases of properties that are outside my price range! They look great! :eek:

Unfortunately, the ones that are available for us seem to have lower yields, shorter leases to less reputable companies, more outgoings paid by the Landlord, no bank guarantees / decent bonds etc etc etc but still it's all relative. Compared to RIPs they still look pretty good, even after the finance issues.

Just the way it is I guess in this pond. It's much easier to make money if you have it in the first place! I haven't given up though - one day I'll find something that stacks up on its own merits and I can actually buy.... and looking through all the rubbish that I have to date will pay off then.

If I stop looking I definitely won't find it! That's my take anyway...

:)
 
Pretty much covered by the 6 or 12 month upfront cash bond, along with the monthly in advance.....but then one can never be too sure about these dodgy Tenants. Sounds like a top idea JIT. Get them to cough up for rent default insurance in case they don't have any money. Brilliant. I'll add that to my list, and their pile.

Your welcome, just doing my bit...

I rang around a few insurers and "rent default insurance" seems pretty unique to CGU. If anyone can find another insurer doing this too I'm all ears...

I haven't read the policy details yet, but the front blurb suggests that the property has to be ''professionally managed''.

It is funny though getting this sort of cover and including it in the tenant's list of outgoings!
 
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Lol TPFKAD,

Feel free to shoot me down (as the holder of no comm @ all) but the 6-12 month bonds u speak of are common in the fish pool you play (1mill + comm) but in the mum and dad comm (sub 1mill) is less common to have large bonds? When i was enquirying with comm leasing agents in my area they was saying in my price bracket (200-500k) they where leaving 1-2month bonds

At mum and dad comm level bank guarantees may be better... ?

As the tenant could use other security against the bank guarantee I presume (rather than cash up front)... ?

And the CGU rent default cover of 50k seems useful here too.

In some ways the biggest risk in CIP is covered for with the above... (ie. bankruptcy of tenant/rent default for any other reason)...

Rent monthly in advance is another way as Dazz mentions, and I saw the benefits of this prior to my recent resi. eviction of a tenant.

I think you could even negotiate rent being paid 2-monthly or even 3-monthly in advance...
 
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In some ways the biggest risk in CIP is covered for with the above... (ie. bankruptcy of tenant/rent default for any other reason)...

Actually, if it is bankruptcy that is the reason for rent default, then I'm not so sure if the bond can be used or whether a bank guarantee is of any use... ??
 
Actually, if it is bankruptcy that is the reason for rent default, then I'm not so sure if the bond can be used or whether a bank guarantee is of any use... ??

My understanding is yes and yes - that is one of the purposes of both. Bonds in these cases are typically held in your bank account, which is unaffected by said bankruptcy.

An unconditional bank guarantee is secured by the bank so it's the bank that has to hand over the money if you ask for it. They will make sure they have somewhere to turn around and get the funds from at all times! Beware though, there are also conditional bank guarantees...
 
My understanding is yes and yes - that is one of the purposes of both. Bonds in these cases are typically held in your bank account, which is unaffected by said bankruptcy.

An unconditional bank guarantee is secured by the bank so it's the bank that has to hand over the money if you ask for it. They will make sure they have somewhere to turn around and get the funds from at all times! Beware though, there are also conditional bank guarantees...

That sounds good...

So if a tenant goes bankrupt and is unable to fulfil the initial lease commitment to term and you had a 6 month unconditional bank guarantee in place, you could go to the bank and collect a full 6 months rent upfront?

And if you re-lease it in less than 6 months time it's like getting double rent for that period?

Would that be possible?
 
And if you re-lease it in less than 6 months time it's like getting double rent for that period?

Would that be possible?

Possible yes if that is what was written into the lease.

However the (few) leases I have come across so far with a bank guarantee limit the lessor's ability to do this to their liquidated damages (ie their actual economic loss) and they would have to demonstrate loss of rent and other expenses for the full 6 months to be justified in keeping the full bank guarantee amount. But we all know it's easy to tot up a few expenses (advertising, agent fees, reletting fees, legals, etc etc) and he who holds the cash is most likely to keep it... an unconditional bank guarantee is pretty much the same as cash.

These leases I have looked at haven't been the most landlord friendly in other areas either so I am sure others could do better..

Keep in mind I have no actual experience of this in a CIP situation - only bank guarantees in my professional life. So if anyone does have real experiences to share, feel free to chime in! Not that you need the encouragement... ;)
 
However the (few) leases I have come across so far with a bank guarantee limit the lessor's ability to do this to their liquidated damages (ie their actual economic loss) and they would have to demonstrate loss of rent and other expenses for the full 6 months to be justified in keeping the full bank guarantee amount. But we all know it's easy to tot up a few expenses (advertising, agent fees, reletting fees, legals, etc etc) and he who holds the cash is most likely to keep it... an unconditional bank guarantee is pretty much the same as cash.

That's interesting, possibly while in liquidation, as each month goes by with no rent coming in, the LL (landlord :)) could get the rent outstanding (+ outgoings) for that month from the bank guarantee?

Or it might be paid to you from the administrator anyway?

I don't know the first thing about liquidation though, voluntary or involuntary...

I will have to re-read Dazz's ''risk came true'' thread...

HiEquity said:
Keep in mind I have no actual experience of this in a CIP situation

Yes, I am aware that we could be in the midst of a ''blind leading the blind scenario'' here! :D
 
I will have to re-read Dazz's ''risk came true'' thread...

Well, I re-read that thread, but still not sure if Dazz had a cash bond or bank guarantee that he was able to access AFTER the tenant went into voluntary liquidation and DOCA... ?

In this scenario though, the administrator was still obliged to pay rent + outgoings after a 7 day period while they tried to trade the company out of the loss situation.
 
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