Tenant Insurance Vs Building Insurance

Hi Guys,

I'm new around here, been lurking for a while but am ready to jump in and mix it up with you guys. My interest is in Commercial property. I'm a new Commercial Investor and am looking to learn / expand my knowledge base with the help of some of the more mature investors around here.

My first (of many;)) questions relates to Insurance. It is a given that the Lessor needs to maintain full building Insurances. The tenant should also have insurance covering them for theft, fitout damage, public liability, glass and fire.

What do you believe the course of action would be in the event of a fire. Say the tenant causes a fire (originates within the tenancy due to what ever reason) that then damages or destroys the building structure, would the tenant's insurance cover them for internal damage and the Lessor's insurance pick up the building damage? Would the Lessor's insurer then claim against the Tenants Insurer? If this is the chain of events, if the Lessor was negligent in ensuring the Tenant had adequate policies in place (maybe no policy at all) would the Lessor's insurer reneg on the claim due to the absence of the tenants policy?

The reason behind the question is I am looking at a future purchase where the existing Lessor is very slack on paperwork etc. He would have building insurance currently but would not have documentation from the tenants confirming if they have current (or any at all) insurance themselves. It is a condition of the lease that they have and maintain insurance but he has not effected the clause to ensure they comply. I would presume at this stage they have no insurance.

Thoughts please...thanks :)
 
if it's required under the lease you can ask for a copy either from the agent or if you're the owner directly from the tenant.

My question was rather what position the Lessor's Insurance company would take with the Tenant if the fire was started within the tenancy or by the tenant. Would the Lessor's insurer pay out on the loss then attack the tenant's insurer for costs? If the Lessor had a Lease detailing the Tenant was to self ensure and the Lessor did not follow up on this would the insurer then wipe the whole thing?
 
unless the tenant was a government entity or some other equally large corporate it is unlikely that the landlord would accept the tenant to self insure eg Telstra self insures for workers compensation but not public liability.

If the owner was insured but the tenant wasn't then it becomes the insurer's problem if there is a claim.
 
No insurance = A bank guarantee for the property value. Nobody would agree. Thats why there is insurance. Normal process is the landlord is named and policy isnt cancelled unless you agree.

Are we taking accidental loss or arson ?? Any acceptable policy should cover his apprentice starting a fire accidentially and loss of the property. I'm also familiar with the owners self insuring so his outcomes are guaranteed. I wouldnt trust the tenant. Charge the premium to the tenant under the lease terms. Problem solved. Tenant also has own policy for their tools equipment etc.

Benefits of a good broker..They know this stuff and see what happens when claims go wrong.
 
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