commercial landlord insurance ?

hi there,

we own a commerical property that we rent out to a restaurant business.
We have business insurance. As i understand, if there is damage to the building causing loss of rent then business insurance will cover us for this.
but what if the tenant stops paying rent ? is there a landlords commercial insurance i can get for this as i dont think business insurance covers it.

my worry is that the tenant's 5 yr lease has ended. (actually ended a few yrs ago) adn though we have encouraged them to sign a new lease, they havent. on one hand i want them to sign a new lease but then i dont want to push them too much bc i dont think business is going very well.
 
hi eyespye

recent research i conducted into the same thing revealed that there was no such product on the market, with no immediate plans for this to be addressed. presuming you are looking for something like residential landlord protection insurance, as was i. unfortunately it seems that your only recourse is the security deposit and/or the courts.
 
Hi there Eyespy
just wondering if you have a copy of your old lease. Just check what insurances the tenant was obliged to take out.
In commercial leases there is often an obligation to take out say public risk, plate glass and other insurances - which could be loss associated with goods the tenant sells etc. The insurance is usually meant to be taken out in both parties names - which means you might have loss of profits/rent covered by the tenant.
Perhaps time to check your records
thanks
 
Nothing like that unfortunately. You can get cover if your building burnt down and had to rebuild but not rental default. The riskier elements of commercial IPs. 3 months rent in advance or bond would be the norm, some would ask for 6 months but it all comes down to how much of the bargaining lever you have at your disposal. With CPs, money is made in the negotiation & problem solving part, be it sales or leasing. If you're good at both, you'll clean up. I'm sure Dazz can add more value here.
 
Echo the above responses.

My broker advised that no such policy existed, however stitching the tenant/occupant with prudent contract wording would provide a decent buffer by way of several month in advance rental payments and a hefty bond. This would help absorb down time between default and eviction and securing another tenant in the unforeseen event of defaults.
 
And having just said the above.............Nov issue of API mag on P. 65 has an advert by CGU called CGU Padlock....with some "subject to" limits on rent default for commercial investments.

Shall investigate further when all our insurances fall due in early Dec.

If anyone else learns of anything further or new about this product.....please add to the thread :)
 
I too took note of this.

I does seem to cover some level of default.....don't know all the details.



And having just said the above.............Nov issue of API mag on P. 65 has an advert by CGU called CGU Padlock....with some "subject to" limits on rent default for commercial investments.

Shall investigate further when all our insurances fall due in early Dec.

If anyone else learns of anything further or new about this product.....please add to the thread :)
 
Hi Cozzie
are you thinking of a company which runs the business and having a fixed and floating charge over the assets of that company?
if so yes - have done them when in banking and finance section of a large legal firm
thanks
 
Thanks Raddles,
Yeah, I own the freehold and the company I am going to lease it to is my old business that I have just sold to my ex business partner.I have said he can lease the commercial property from me,but I am not convinced that he is not going to screw the company and end up defaulting on the lease repayments.So I was thinking about puting a fixed and floating charge on his business into the lease as a condition.
Just wondered if anyone had done this in a lease before.I understand that it is used a lot with finance.
Cozzie
 
I tried to get this CGU Padlock insurance, but it was a fruitless. CGU say only their brokers do it and of course their brokers don't know anything about it. They say it Padlock exists, but are not well-versed on the "landlord insurance" part of it.

What the broker recommended was trade creditor insurance. I didn't go far enough to assess the likeliness of a payout in circumstances where my tenant defaulted, but the rough numbers for one of my IPs were about $4k premium per annum to insure $70k rent.

Sounds much higher than resi landlord insurance, and it is, but I actually considered going ahead. However, I finally decided to leave it.
 
On all of our commercial Leases, we require a bank guarantee for the sum of 6 months rent plus outgoings. Maybe something to think about if you have a chance to get them to sign a new Lease.

Boods
 
New idea, haven't checked it out yet, but... income protection insurance. They extend policies to cover rent default, just need to ensure they also cover commercial (somehow doubt it, but worth a try).
 
Yes there is a new CGU policy called padlock which includes, among other risks, tenant default on rent for commercial landlords. Go into www.cgu.com.au under products for info. My insurance broker has just confirmed it is available so if need further info he knows about it.
 
gee eyespy..can I rent a shop off you :)

My shop lease (in a suburban strip centre NOT a large multiplex) had LOADS of clauses.
Public Liability, Glass, Lease lines, staff numbers etc etc.
My lease HAD to be re-signed one month BEFORE expiry or I would not (could not) gain acess ..(Saw it happen to a store in the centre who was quibbling over details, on the day after expiry their shopfront was chained and padlocked by centre management.)

I guess the bottom line is that business owners rent with much more emotion than house tenants..The commercial tenancy is sooooo much more imporant than where you live. ie: A big part of a business is location...move and the business loses BIG time.

My advice is to get tough wth them...they are being "naughty children" treat them accordingly.
 
i want to get tough with them but in current economic climate, i run the risk of taking a while to find a new tennant if they decide to walk. And commercial loan repayments are quite hefty when there is no rent coming in.
 
Hi Samrawet
Not sure why the links not working, however just go to CGU website.
This is basically what it says about the product from the website:

Padlock in brief
(Subject to specified limits and conditions. Please also note underwriting terms and conditions and acceptance criteria apply).

Eight section policy:

Material or equipment damage to commercial property - accidental damage has no sub-limit

Loss of income insurance cover for commercial landlords - covering tenant rent and all income

Theft, money, rent default - theft has no sub-limit, blanket coverage on money to $50K, our cover for rent default on commercial properties is unique

Glass damage repair

Tax audit - up to $5,000

OH&S legal costs - up to $100,000

Commercial liability insurance cover - tailored to the commercial property owner

Machinery/Electronic equipment breakdown
 
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