Get Right to Make Tenant Get Insurance That Fits Circumstances

Sadly, public violence has escalated in the past few years, with attacks in workplaces, entertainment venues, and malls. That’s why it’s important to give yourself the right to make a tenant buy new insurance or increase its coverage during the lease term to respond to changing circumstances.

Owners often overlook the obvious reasons for increasing insurance coverage. So when you’re negotiating for the tenant to adjust its coverage, make sure that these key instances trigger your right:

Tenant’s use or manner of use of space changes. If you’ve let a tenant change the use or manner of use of the space, it’s appropriate to ask that tenant to ensure that the new venture is adequately covered. For example, if, midway through the lease, a gym in your center decides to add a rock-climbing wall, you should ask that tenant to make sure that it has considered and provided coverage for the risks associated with that activity.

Your lender requires more insurance. It’s not uncommon for a bank to ask an owner to increase its insurance coverage and to make its tenants do the same.

Coverage minimums increase. Coverage minimums are somewhat unpredictable and can increase at any time. Some increases are based on new legal requirements.

New types of coverage become available. As business and technology advance, so do the needs for insurance. For example, some tenants need “e-commerce insurance” to cover against losses resulting from someone hacking into their computer networks or intentionally shutting down their computer systems.

If you don’t have the ability to make your tenant get appropriate insurance and as a result its business is affected, it won’t be able to conduct business—so it might not be able to pay rent. For Model Lease Language you can use to carve out the right to make the tenant buy new insurance or increase its coverage, see “Make Tenant Adapt Insurance Coverage to Changing Circumstances,” available to subscribers here.