CILA Property SIG Webinar

Commercial Leases & Insurance Claims

Mike Weatherhead, Director, Vericlaim UK Ltd.
28th June 2017

Q&A Session
1. If there is a carpet installed by the landlord and the tenant pays to replaces it does this now become
the tenant’s responsibility.

Unlikely. If the tenant replaces landlord’s property, the replacement will be the landlord’s.
2. Conversely, can you discuss briefly the possibility of a Tenant recovering from a Landlord? For
example, leaking terrace or pipe work that goes unresolved for a number of weeks/months that causes
damage to Tenant's Contents/Stock etc.
A tenant has a right of action against a landlord for breaches of lease covenants. Failure to rectify a
defect might be a breach of “quiet enjoyment” or another specific covenant.
3. What is your experience where the tenant takes over a tenancy and uses part of a pre-existing fit out? I
have a claim where the insurer is asserting that it is the landlord's property however it would appear
the tenant has assumed liability.
You really need to understand what the parties agreed between them. If nothing then it really depends
on the circumstances of the tenancy transfer – e.g. assignment; previous tenant quit.
4. How common is a specified peril insurance cover by the Landlord as opposed to a general cover. i.e.
can theft be the tenants responsibility to insured for building damage during F&V entry or exit?
Most landlord policies these days are all risks but fire and perils is perfectly possible. Most leases don’t
require anything more comprehensive.
5. In case of damage to leased premises but there is no rent cessation clause, should we impute one on
behalf of tenant as it would be unfair to expect tenant to pay for something can’t use?
No not really. A lease that says rent should be paid with no qualification is still a contract. Might be
different if the premises were destroyed as you might argue the subject of the contract no longer
exists.
6. If there is a verbal lease, aside from asking questions, is there any other way to validate responsibility
for the fixtures/improvements?
Find out who put them in and determine whether they are fixtures or improvements – they are far
from being the same thing.
 7. If a tenant moves into a property (Chinese takeaway) and there is already an extraction system in situ
(which was installed by a previous tenant) who is responsible for repair/replacement following a fire?

Simple answer is the landlord as the previous tenant abandoned it and it became the landlord’s
property.
8. Were a tenant replaces say the landlord’s air-conditioning unit...who has responsibility to insure? ...I
assume the air con becomes part of building as an improvement and would come under the landlord's
obligation to insure?
A replacement of part of the landlord’s property remains the landlord’s, so same as the rest of the
demise in terms of who insures it.
9. How common is a specified insurance peril stated by the lease that the Landlord does not need to
include theft cover and so theft damage becomes the tenants responsibility to insured for building
damage during F&V entry or exit?
Never seen anything that specific. No reason why not though.
10. What is main difference between a lease and a licence to occupy and in order to issue a licence relating
to a particular property, do you need to be the owner of the property?
Just the details and the terms really. You don’t have to be the owner but you need to be in lawful
possession.
11. Not urgent - could Mike let me have the case law details of the follow up case to Mark Rolands?
Elizabeth Fresca Judd v Galina Golovina (2016)
12. Could you go back through the crash deck scenario again please? I haven't 100% understood
A landlord may have obligations to undertake works with the minimum of reasonable disruption to the
tenant. So putting in a crash deck so re-roofing can be done with the tenant still in occupation may be
no more than a landlord’s responsibility, so is part and parcel of the landlord’s costs for the work.
13. In the absence of a lease - can we proceed based on a verbal agreement and how can we clarify the
requirements etc.
Yes but the problem arises if the landlord and tenant don’t agree on some aspect. Common law will
then prevail.
14. I have heard that Berni Inns have been challenged, do you know anything about that?
See 11 above.
15. Sorry ... I got confused on slide 15. Was the different definitions of building in the lease or the
insurance policy?
Lease.
16. Could you please explain the term full repairing lease
Generally places the responsibility on the tenant to carry out all repairs required to the property during
the tenancy. Usually makes an exception for those risks the landlord has insured against.
17. In the event of damage to a leased premises and there is no lease cessation clause, would we impute
one on the basis that it’s unfair to expect tenant to pay when can’t use premises?
See 5 above.

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and convenience of the reader. The content, views and representations made in this publication are the sole
product and responsibility of the writer/s who has produced it. By making this publication available the CILA does
not offer any endorsement or recommendation of the views and opinions expressed therein. For a full explanation
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 18. So if there are increased costs for working at a weekend in a retail outlet these should be covered as a
general building cost rather than under LOR as additional cost of working

Depends why weekend working. If to speed it up then a matter for allocation but if to reduce
disruption whilst the tenant remains in occupation then a different matter. Not sure this is a good
example though as I’d have thought weekends were the period a retail outlet was busiest. Night
working might be a better example.
19. How is "fixtures" interpreted? What are the steps we need to take to determine the insurance
interest?
You really need to read my separate paper as this is far from simple. Basically, you might say a fixture is
an addition to a building that, in certain circumstances, is removable.
20. What standard position applies where there is only a verbal lease agreement?
It is simply a verbal contract, the basis of which is not recorded in writing.
21. you used the term improvement, does this relate to permanent alterations to the demised premises
e.g. if they were improved by providing additional office accommodation by using temporary buildings
that can be removed these do not belong to the landlord
You really need to look at intention. If something was installed with the intention is remains, it will be
seen as an improvement. Something clearly intended to be temporary would not – temporary
buildings by their definition are not intended to be permanent.
22. In the case of the recent London fire, if the tenant is found to have been responsible for the fridge fire
in negligence which spread to all flats, could the council take a case against them?
Depends on his lease but the other tenants certainly could.
23. Do you have any observations on claims in tenanted properties involving damage to glass/shopfronts?
No not unless something specific.
24. Hi, what do you suggest is best evidence you can request from a landlord that a tenant has ceased to
pay loss of rent?
Bank statements showing it being paid and stopping.
25. Hi Mike, What is your view on adjustment of claims/consideration of lease issues where the Tenant
wants to take on building works to reduce delay and mitigate revenue loss? Any pitfalls or specific
lease issues to address? Thanks
Depends on the type of tenant but there are issues with quality of work, timescales, contractual
arrangements (warranties), etc.
26. If the tenant has insured his improvements, is this the more specific insurance for these items or only
to be used if the landlord's policy does not deal with these costs?
If the landlord is required to insure additions and improvements, then I’d really regard the tenant’s
insurance as being of a contingency nature.
27. A common situation is where a tenant will point to their lease where it says that they are responsible
for maintaining the premises to support a claim for, say redecoration following a peril. This can be a
difficult argument to counter. What are your suggestions?
Usually the duty to repair and maintain has an exception where the damage is caused by a peril the
landlord is required to insure against.

This publication has been made available by the Chartered Institute of Loss Adjusters (CILA) solely for the use
and convenience of the reader. The content, views and representations made in this publication are the sole
product and responsibility of the writer/s who has produced it. By making this publication available the CILA does
not offer any endorsement or recommendation of the views and opinions expressed therein. For a full explanation
of the terms and conditions upon which the CILA provides this publication please see our full disclaimer which
available on the Institute website.
3
 28. Can you confirm if a carpet is installed by the Landlord and upon occupancy the tenant replaces this
without permission whose responsibility this would now be.

I’d say it will be the landlord’s.

29. Hi - you mentioned that there were other case law since the Berni inns of 1995, can you tell us more?
See 11 above.
30. Where in a lease the landlord is required to insure the demised premises except fixed glass but the
tenant fails to insurer fixed glass, do you believe that an insurer who has paid for reinstating the
building under the landlord’s policy has a valid subrogation action against the tenant re the cost of the
new fixed glass?
If the tenant is in breach of a condition of the lease, that is actionable for damages, so yes.
31. If TI is covered under both landlords Buildings policy and also tenant’s commercial policy, would the
latter be expected to pick up the costs in the first instance?
Other way round if the lease requires the landlord to insure additions and improvements.
32. Do you agree that we must insist on seeing the lease in these situations and that "I can't find it" is
simply unacceptable. We will be unable to proceed without viewing it to determine all relevant facts.
I don’t see how you can proceed without seeing the lease as you don’t even know the parties.
33. If you saw a loss where the tenant had added an expensive fixture but had failed insured it separately
would it be picked up by the landlord’s policy ex gratia?
Don’t see why it should.
34. Mike you mentioned before 'improvements' can these not be both tenant’s improvements and
landlord's building improvements? If I understood correctly you were saying that improvements were
landlords?
The distinction is only about who installed them. Irrespective, they belong to the landlord.
35. With regard to the Mark Rowlands v Berni Inns principle, it is presumably open to the landlord to insert
a clause to ensure that the tenant can be held responsible for damage caused by that tenant's
negligence?
That could certainly be done if that was what both parties wanted to agree to.

36. If the carpet is glued down would the position be the same
I don’t think it makes any difference but there are differing views on this.
37. Mike, what would be the position on specialist equipment? For example specialist plant and
machinery. Both the equipment itself and potential the increase in services or supplies to feed them.
If a tenant installed these they are the tenant’s chattels. Nothing to do with the landlord.
38. What would happen with laminate flooring?
I think it remains the property of whoever installed it – unless abandoned by a previous tenant.
39. What if the fixture & fittings are not stated in the lease however the tenant insists it was them who
installed them? Verbal confirmation with landlord will suffice?
If both parties agree and there is nothing to document it, you can only really accept the situation.

This publication has been made available by the Chartered Institute of Loss Adjusters (CILA) solely for the use
and convenience of the reader. The content, views and representations made in this publication are the sole
product and responsibility of the writer/s who has produced it. By making this publication available the CILA does
not offer any endorsement or recommendation of the views and opinions expressed therein. For a full explanation
of the terms and conditions upon which the CILA provides this publication please see our full disclaimer which
available on the Institute website.
4
 40. Verbal leases. A building owner in individual capacity owns a building which they use in connection
with a family business. Can they basically tell the adjuster what they want when it comes to a claim to
best suit the cover in place?

They can really, if landlord and tenant concur. Up to you to prove otherwise.
41. Installation of fire suppression to scaffolding to comply with fire regs whilst production continues?
Sounds like part and parcel of the repair project to me.
42. Is there a difference between fixtures and improvements? Examples of items that would typically be
fixtures and improvements?
Yes there is but it’s too big a topic for a simple answer. Get hold of a copy of my CILA paper on
Landlords and Tenants where it is explained in detail.
43. How common is a specified peril insurance cover by the Landlord as opposed to a general cover. I.e.
can theft be the tenant’s responsibility to insured for building damage during F&V entry or exit?
See Q4 above.
44. What is the insurance position if no cessor of rent clause incorporated within the lease
See Q5 above.
45. Aren't the landlord’s fittings and fixtures ordinarily listed in one of the schedules?
Sometimes but more often not in my experience as such schedules relate to the position at the time
the lease was taken out, so do not deal with changes since then.
46. Viz no cessor of rent clause, for Ireland there is Deasy's Act, where the tenant can look for relief from
the landlord where they can't use the building. Correctly called Landlord and Tenant Act, (think 1841).
Sounds like a fair bit of legislation.
47. When the tenant abandons his fixtures, at what point do they transfer to the landlord?
On abandonment.
48. Where can we get a copy of the paper to which you refer regarding Landlord & Tenant?
Contact CILA. It will be in the Technical Library but I don’t think that is fully up and running yet.
49. In this instance where a tenant has a contents only policy and block policy’s definition of the demised
premises only includes the external walls/ducting and not the internal surfaces, does this result in noc
voer being present?
Sounds like it from what you describe.
50. Mike, do you think the following wording in a lease makes the tenant responsible for insuring the
building - " The landlord agrees to lease the unit located at xxx address hereafter referred to as the
subjects on the following terms & conditions..............condition 10 "you will have such insurances in
place to cover any damage to the subjects" I think this is far too unclear and ambiguous and argue
that it does not.
It’s a bit dangerous to interpret a position on such a small extract, so you need to look at the overall
lease. If the intention seems to be the tenant has to insure – and it sounds like it from this – then so be
it. If there is nothing suggesting the landlord should, or has, then it makes the position more difficult
for the tenant.
51. Examples of items that would typically be fixtures and improvements?
Fixtures might include suspended ceilings, air conditioning, mezzanine flooring
Improvements might include plaster on walls, decoration, replacement windows, new openings in
walls, etc.

This publication has been made available by the Chartered Institute of Loss Adjusters (CILA) solely for the use
and convenience of the reader. The content, views and representations made in this publication are the sole
product and responsibility of the writer/s who has produced it. By making this publication available the CILA does
not offer any endorsement or recommendation of the views and opinions expressed therein. For a full explanation
of the terms and conditions upon which the CILA provides this publication please see our full disclaimer which
available on the Institute website.
5