Commercial landlord insurance
By Leana Schwartz, Independent Commercial Insurance Agent
There are many risks involved when leasing commercial rental property, making commercial insurance a must for both property owners (landlords) and tenants. A commercial landlord can be an individual, corporation, trust, or any other type of business entity. As such, an insurance policy may cover an individual owner who rents a few hundred square feet to a small business tenant, or a large real estate development corporation that owns a major shopping mall and leases to hundreds of tenants.
A commercial landlord splits insurance risks with their tenants. Generally, a landlord insures their building(s), investment, and derived income while lessees insure their business inventory, property, and liability responsibilities.
Types of commercial landlord insurance
There are two general types of commercial landlord insurance: property and liability. Property coverage protects landlords’ property against any type of damage that may negatively impact the owners’ buildings, grounds, and income generated by the rental activity. Landlord property damage insurance pays for tenant damage in some, but not all situations. It is critical for landlords to work closely with their insurance agent to understand their policy, and if necessary, opt for additional coverage for tenant damage.
Liability insurance protects landlords’ financial assets in case another party files a lawsuit seeking monetary compensation for alleged damages. These damages can include property loss, physical injury, or even death. While landlords are responsible for keeping their property in good working order, safe, and well-maintained to prevent injuries to others, it is impossible to prevent every type of liability situation. Landlord liability insurance covers the costs stemming from litigation, whether or not the landlord is directly at fault for any alleged losses.
A commercial landlord may be potentially held liable in several situations:
- If a tenant or visitor is injured as a result of the landlord’s negligence.
- If a property maintenance problem causes injury to a tenant’s person or property.
- If a landlord evicts a tenant without following the law and/or without proper due process.
- If someone breaks into leased property due to faulty locks, windows, or doors.
- A loss results from any action the landlord should not have reasonably taken, or due to a lack of action the landlord reasonably should have taken.
How commercial landlords can reduce liability
There are myriad steps commercial property landlords can take to reduce and eliminate potential liability problems. From a safety perspective, it is critical to keep the premises clean, adequately lighted, and in good repair; to trim foliage to reduce potential visibility hazards; to provide regular maintenance to air conditioning, heating, plumbing, electricity, and other central systems; to remove any leaks, standing water, and other trapped moisture; and to provide a comprehensive check on every unit before a new tenant moves in.
Security is another crucial concern. Reducing and preventing security breaches and other risks can be accomplished by changing locks between tenants; installing alarms, motion-detecting lighting, and secure fencing; and use of a video surveillance system.
Finally, reducing liability risk also includes protecting oneself against claims of wrongful eviction, allegations of discrimination, and other legal issues. Steps to take include retaining the services of a qualified attorney to provide accurate legal advice; knowing and following the law; maintaining thorough paperwork; documenting all tenant interactions; never letting a tenant take possession without a signed lease; and entering a rental space only upon proper notice, except in an emergency.
How much does commercial landlord liability insurance cost?
Premium costs depend on several factors. For commercial landlord insurance, these factors include:
- Amount of coverage needed
- Location of the property
- Additional property features which may increase or reduce liability