Insurance In A L/O
I should be wrapping up L/Oing a place from the owners next week.
Question: They as my landlords will, I'm sure, be carrying a landlord policy on their place. I'll be doing whatever I can to get a sub-tenant in immediately. Should I also carry my own landlord policy for my own protection? (Or can I, for that matter, the title not being in my name?) Or if a sub-tenant sues me, should my umbrella policy cover it?
Depending on your contract, you may need to carry the insurance on the property. Even though you don't yet hold the deed, the language of the LO contract may dictate that you insure it (in other words, the contract itself gives you "insurable interest" and projects any potential property loss to you).
If the contract doesn't provide such language but you still have an insurable interest in the property itself, such as rehab work/value, you should be named on the owner's "landlord" policy as a loss payee for at least the value of your interest. You should also make sure you are named as an additional insured (for liability protection). You may also need to contractually rectify any potential loss of rent you as the sub-lessor would have at risk in the event of a claim that displaces your tenant.
Hope this helps. Good luck,
Tim[ Edited by norrist on Date 05/03/2004 ]
First of you must have an insurable interest in order for you to get a policy in your name. Unless you have title you can not get the policy in your name. However, if you have control of the property and depending how the deal is structured you should get a POA from the seller and control the policy on the seller's name and you as an additional insured.
Further, make sure the policy does provide for loss of rent. The only other way to have the property be taken care of by the tenant potential buyer is if you do a Triple Net Lease type, which it is commonly used with commercial leases.
Hope this helps.
[addsig]
The contract language of the L/O may or may not indicate the insurable interest. Many carriers will place the contract in the lessee's name, if this is the case. If I am the lessor, however, I'd much rather be the first named insured. With this in mind our L/O contracts don't "pass on" the insurance interest.