Lease stipulates full replacement insurance but can only get indemnity

[ronniegal]

As the subject heading shows - how does this affect a landlord's obligation towards their tenant? When the tenant moved in, we had full replacement. Now with the insurance companies coming down hard on these old buildings, we can only get cover for indemnity. How have some of you got around this?

Many thanks for your help.

[PTWhatAGreatForum]

Please explain further. Has the tenant stipulated this? Generally the landlord insures the building and the deal on this is between them and their insurance company.

Tenants insure their business plant and machinery and maybe liability as well. The building may present an issue for the tenants insurance but this is not the building's insurance itself, but because their insurance will want to assess the risk for their P&M and PL insurances.

Insurance questions I've been asked (as a tenant) include:
- Monitored alarm?
- Construction material and age of building?
- Age of building?
- Any known defects?
- Has the council designated the property as a flood or subsidence risk?

[ronniegal]

When the tenant signed the lease, the insurance option under "landlord's insurance" had (a) full replacement, retained and (b) indemnity, crossed out (it's the standard commercial lease). A year later the insurance is up for renewal and we are no longer able to get full replacement.

So, because we are no longer able to obtain full replacement insurance as stated on the lease agreement, does only getting indemnity insurance create legal issues.

Thanks.

[PTWhatAGreatForum]

Please elaborate - are you the tenant or the owner?

[ronniegal]

I am the owner.

[PTWhatAGreatForum]

Ah ok, so what relevance does this have to the lease? IE: What difference does it make to the tenant?

[ronniegal]

Well that's it. I don't know if it would have any relevance to the tenant - one could say that we are breaching the lease as landlord by not insuring the building for full replacement (even though we have no choice in the matter). Just wanted to know if others thought this could potentially be an issue.

[Beano]

I would say in the event of a damage you would be obliged to apply the insurance proceeds to to the repair or rebuild
if Indemnity then less would be available
I would say the tenant could insist you top it up
...next time put ...as elected by the owner