Landlord and Tenant: Insurance - landlord fails to recover premiums after failing to insure joint names with tenant
In July 2012, the Upper Tribunal decided that a landlord could not recover insurance premiums from its tenant for four out of five years because it had failed to insure the building in accordance with the lease covenants.
The lease required the landlord to insure the building in the joint names of the landlord and the tenant, and the tenant to reimburse the landlord for insurance premiums. In the first year, the tenant's interest was specifically noted on the certificate of insurance and the Upper Tribunal concluded that this was sufficient compliance with the landlord's insurance obligation.
However, for the next four years, the landlord's insurance policy included a "general interest" clause without noting the tenant's interest as the insurers ceased listing individual tenants on the annual certificate. The Leasehold Valuation Tribunal held that the landlord was entitled to a reimbursement from the tenant as the building was adequately insured but, on appeal, the Upper Tribunal disagreed. Notwithstanding that the tenant's interest was properly insured, the landlord was not entitled to recover the premiums because it had failed to insure the building in the joint names of the landlord and tenant.
No specialist insurance evidence was produced in this case to demonstrate that the tenant's interest was protected under the "general interest" clause and the parties were unrepresented which resulted in a decision which followed the strict letter of the lease rather than the commercial reality. Despite this, the case is a stark reminder to landlords that they must check their obligations carefully when insuring a building and be aware that unless they strictly comply with their covenants they could risk losing the right to recover insurance premiums from tenants. Whilst this decision concerned residential property, the determining factor was the wording of the lease. There seems no reason in principle why it would not apply to commercial leases containing a similar obligation for the landlord to insure in joint names.