Insurance Rent: Recovering the Premium
Written by Scott Jones, founder of CommercialPropertyKiln · Last updated
Spot something wrong? Report an error. We reply within 48 hours.
Where the landlord insures the building, the cost is usually passed to the tenant as insurance rent. The lease governs how, and there are traps to avoid.
How it works
Under most commercial leases the landlord arranges the buildings insurance and the tenant reimburses the premium, often called insurance rent. In a multi-let building the premium is apportioned between tenants, typically by floor area or another fair basis.
What you can recover
You can generally recover the premium for the cover the lease requires. Whether you can recover extras, such as commission a landlord or agent receives from the insurer, or the cost of a valuation, depends on the lease wording. Recovery of broker commissions in particular has been the subject of dispute, so the lease terms and transparency matter.
Be transparent
Tenants are entitled to see what they are paying for. Providing the policy details and a clear breakdown of the apportionment heads off disputes and reflects good practice, in the same spirit as the service charge rules.
Keep it clean
Insure for what the lease requires, recover only what the lease permits, and be open about commissions and apportionment. Take advice on the lease wording if recovery is challenged.
What is insurance rent?
The premium the landlord recovers from the tenant where the landlord arranges the buildings insurance, often apportioned in a multi-let building.
Can a landlord recover broker commission through insurance rent?
It depends on the lease wording, and recovery of commissions has been the subject of dispute, so transparency matters.