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When a tenant wishes to carry out works to premises which form part of a larger property, it is very often that the insurance arrangements in the relevant documents (agreement for lease or licence to alter for example) do not take into account the practical realities of what and who needs to be insured.
Fit-out works are often carried out pursuant to the terms of a JCT form of building contract. As none of the JCT insurance options caters specifically for the fit-out scenario, the tenant needs to ensure that the building contract be amended to reflect what has been agreed with the landlord and the contractor. The key relevant insurances a tenant should consider are:
With regards to the all risks insurance cover for the works, there is generally no difficulty in taking out such insurance in the joint names of the contractor and the tenant (employer). The contractor will, as a matter of course, maintain public liability insurance to respond to claims by third parties who are not employees of the contractor.
However when it comes to deciding who is best placed to cover against the risk of damage to the building as whole, more often than not, the parties find themselves at an impasse.
The existing buildings insurance would seem to be obvious solution to the problem, as long as the tenant and contractor are added as insureds for the duration of the fit-out works. In practice however, landlords are unlikely to accept going down this route because of concerns related to potential increases in premiums and the administrative burden involved.
Where the landlord is uncooperative, the tenant may:
The question of insurance in the context of tenant fit-out works is proving time and time again to be a difficult one to answer. Tenants and landlords alike should ensure that insurance is no longer an afterthought, but explore mutually convenient arrangements at the heads of terms stage, as a mutually convenient solution may take time to be agreed.
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