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Dealing with Insured Damage to Commercial Property

Damage to Premises caused by an Insured Risk

Damage or destruction cause by an insured risk

A standard commercial lease requires the landlord to insure the premises against a list of “insured risks”. These will include fire, flood, storm, earthquake and many other risks. If the premises are affected by one of the insured risks, the lease provisions will dictate how the landlord and tenant should respond. The main issues are considered below.

Repair or reinstatement

Most leases require the tenant to keep the property in good repair. However, the tenant is not usually required to repair damage caused by an insured risk (unless the tenant has caused the damage).

The lease will usually require the landlord to make an insurance claim and apply the proceeds of the claim to repairing the damage. Sometimes the landlord is given the option of bringing the lease to an end instead of carrying out repairs.

The lease is likely to specify that the reinstated premises must be equivalent in size and layout to the damaged premises (so far as is possible).

Rent suspension

The tenant is usually given the benefit of a rent suspension while the premises are unfit for occupation. The rent suspension will apply until the premises are reinstated. Sometimes the lease will provide for a maximum rent suspension period. This is usually 3 years, which is the period for which most landlords’ loss of rent insurance will pay out.


As mentioned above, sometimes the landlord is able to terminate the lease instead of carrying out repairs.

Some leases give the tenant the right to terminate the lease if the landlord has not completed the repairs within a certain timescale. The timescale is likely to correspond with the rent suspension period so that, if the landlord has not reinstated the premises within 3 years, the tenant may terminate the lease before rent becomes payable for premises that are unusable.

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