Landlord or Tenant: Who Should Insure the Building?

Courtesy: Time Magazine

 

As a landlord, have you taken time out to think about the risk your property is exposed to in the custody of your tenants? There are different kinds of tenant: the careful ones and the negligent ones. Many buildings have been set ablaze by the negligence of tenants, and in such cases, the tenants are too financially incapacitated to bear the repairs of the damaged building. The landlords, in such cases, are left to lick their wounds. On the other hands, as a tenant, what measure do you have in place regarding your apartment?

Let us consider this example; a particular landlord was taken to court by his tenant for damage to his (the tenant) properties as a result of a recent fire incident. His landlord counter-sued him for causing the fire while claiming damages. The tenant blamed the landlord for not having the electrical system in order which led to the incident. It seems to be a knotty case. From the preceding, three positions are possible:

• If the landlord gets convicted that the fire was due to his fault, he will be responsible for fixing the building and will pay the tenant damages and also his inconvenience e.g. cost of getting an alternative accommodation, loss of rent and so on.
• If the tenant is convicted of causing the fire as a result of his negligence, he would be held responsible for fixing the landlord’s building.
• If none of them could be convicted of the fire or found equally liable, then they both will have to take care of the repairs of their properties themselves.

Now, the million-dollar question begging for an answer still is: Who should insure the building? The answer is both of them. The landlord and tenants both have insurable interest in the building differently. The landlord can insure the whole building while the tenant can insure his properties within the building and also the legal liability that might arise as a result of loss/damage to the building. Now, what is the term Insurable Interest?

Insurable Interest is the legal right to insure arising out of a financial relationship recognized at law, between the insured and subject-matter of insurance. What this mean in essence is that for one to insure a property, there must be a relationship with that property. The relationship must either be legal or financial. This means that the owner benefits from the continual existence or suffer deprivation from the loss the subject-matter of insurance.

Watch out for my next post on Insurable Interest.

Now with that knowledge, let us now analyze in details roles of both landlord and tenants regarding insurance.

The Landlord

He owns the building and if there is fire incident he loses everything. That is why he needs insurance to protect himself from financial loss as a result of fire damage to the building. A landlord, therefore, needs to insure more than the tenants because he has a whole lot to lose compared to the tenants. He should not depend on court ruling to recoup his investment because tenants do not have the financial muscle to pay in such case. He should insure for his safety.

The Tenant

He occupies part of the building and if there is fire incident he loses his properties. The landlord sued by the tenant for negligence and will pay if found guilty. He needs insurance to protect himself against such legal liabilities. A tenant needs to insure too because his property and the legal liability over the landlord’s property are at stake.

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