You might be described as a commercial landlord if you own a property or properties used as shops, offices, GP surgeries, warehouses or for any number of other business purposes, that you let to tenants or leaseholders.
Not only do you need to protect your investment in the physical bricks and mortar or any premises but also guard against potential liabilities.
The following are some of the most frequently asked questions (FAQs) currently raised about the subject.
Why are commercial landlords currently in the news?
Businesses across the board have suffered in general throughout the health pandemic and the successive lockdowns that followed. As a result, many commercial tenants are struggling with arrears of rent, explained a news story last month.
Commercial landlords are, therefore, currently in the news because of the government’s deliberations about when to lift restrictions that have been in place to date to prevent repossession of property on which tenants have rent arrears of at least 457 days (for proceedings between the 25th of March and the 23rd of June 2021) or 554 days’ rent (between the 24th and 30th of June).
The status of your rent guarantee insurance
While the possibility of legal proceedings under the Commercial Rent Arrears Recovery (CRAR) scheme has been restricted because of the pandemic, insurers have been unable to sell rent guarantee insurance products (since these, in turn, rely on legal action for the recovery of the debt).
This has left many commercial landlords, therefore, eagerly awaiting the relaxation of the temporary cessation of legal proceedings so that they can once again pursue the recovery of rents they are due.
It has also served to impress on landlords the wider benefits of commercial landlord insurance more generally.
What are those wider benefits of commercial landlord insurance?
These range from protection of the building itself, to critical features such as the shop front or window, the contents, and indemnity against the various liabilities to which you may be exposed as the landlord.
What part does building insurance play in commercial landlord insurance?
It might be argued that the very heart of any commercial landlord insurance policy is the building insurance that safeguards against risks of loss or damage to the structure and fabric of the commercial building itself.
Those risks are as varied as fire, earthquakes, explosions, floods, impacts, storm damage, theft, and vandalism – and the maximum building sum insured typically needs to be equivalent to the cost of reconstructing the premises following their total loss.
Does commercial landlord insurance also cover the contents of the property?
Your tenants or leaseholders are likely to have fitted out the premises to their own specification and have supplies, materials, and work in progress within the property. Insurance cover for those items is a matter entirely for your tenants.
Nevertheless, you might want to arrange contents cover for those items you own, and which remain in the commercial premises.
A particularly vulnerable point of concern for any shop or retail outlet is likely to be the storefront and window display. As the landlord, you might want to pay close attention to adequate insurance against the risks of breakage – whether accidental or as the result of malicious damage.
Does the landlord of commercial property bear any public liability?
As the owner and landlord of the property, you may be held liable for any injuries sustained or property damage suffered by your tenants, their customers and visitors, neighbours, or even passing members of the public.
If you are held responsible you may be ordered to pay hefty compensation – especially if injuries are sustained – and, so, landlord liability indemnity insurance for commercial property typically extends to at least £2 million and is commonly £5 million, or even more.
The respective public liabilities of yourself as the landlord and your tenant or leaseholder as the individual or individuals responsible for running the business may, of course, be subject to dispute – ultimately resolved by way of a hearing before the courts.
Do I stand to gain any compensation for loss of rental income?
If the premises become unusable following a serious insured event – and not from any lockdown necessitated by the recent coronavirus pandemic, for instance – then your commercial landlord insurance policy may provide compensation for the loss of rental income you suffer while your tenants can no longer run their business from the premises they rent from you.
You might even need to arrange alternative premises from which your tenants or leaseholders may temporarily run their business.
In either event, your commercial landlord insurance policy may make provision for suitable compensation – up to prescribed limits.