Blog Question – Loss of Rent and the Treatment of Outgoings

http://www.dreamstime.com/-image14799454I received this question this afternoon:

Afternoon Allan,

Regarding insuring outgoings from the Landlord’s perspective, is this only insurable if it is specified on the lease that outgoings are paid by the tenant? 

Alternatively, if the outgoings are payable by the Landlord, does it then default to just insuring the loss of rent only?  I.e. are outgoings insurable when the Landlord is responsible for them?

Regards,

Ryan [surname and email provided]

What you say is perfectly correct Ryan. If the landlord pays the outgoings out of the gross rentals he charges, then that amount, plus a growth factor to cover expected rent increases moving forward, is the correct amount to insure.

If the tenant pays the outgoings on top of the rent, then the outgoings need to be added to the sum insured/declared value, then add the growth factor.

The whole idea is to have the Insured be put back financially where they would have been but for the loss. If, under a rent abatement clause, the tenant can stop paying rent and outgoings, then the outgoings need to be insured as the landlord/property owner will now have to meet them.

If the landlord meets the outgoings then his maximum loss is the gross rentals. To insured outgoings on top of this means an insured would be over insured.

Regards

Allan

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