Who Is Responsible For Insuring A Commercial Property?

Who insures a commercial property depends on the lease agreement and the property type. In most cases, the landlord insures the building structure; the tenant insures their own business contents and liability. Mixed-use properties (residential above a shop, for example) add complexity, and responsibility often splits between different parties.

The lease is your starting point. It will specify which party pays for buildings insurance, which covers contents, and who holds the liability policy. Getting this wrong at lease sign-off can leave a gap when a claim happens.

Disclaimer: This guide explains general principles of commercial property insurance responsibility. It is not personal advice. Your specific obligations depend on your lease terms, local regulations, and the property type. Speak to an insurance broker before assuming responsibility for any property's cover.

Who Typically Pays For What

The Landlord's Role

The landlord usually insures the building structure itself: the walls, roof, permanent fixtures, and common areas (corridors, stairwells). This is called buildings insurance and protects the fabric of the property against fire, flood, subsidence, theft, and other perils.

The landlord pays the premium and recovers it through the lease terms, either as an explicit insurance charge or built into the rent. Some leases require the tenant to reimburse the landlord's insurance costs.

Why the landlord takes this on: They own the asset. If the building burns down, they have the most to lose.

The Tenant's Role

The tenant typically insures:

• Business contents - stock, equipment, furniture, fittings they've brought into the space. This is separate from the building itself.
• Business liability - if someone is injured in their premises or they damage a third party's property through their business activities. This covers legal costs and compensation claims.
• Specific trade risks - depending on what they do. A restaurant might need cover for spoilage of perishables; a workshop might need tools and machinery cover.

The tenant pays these premiums directly. They're the ones using the space day-to-day and creating the risks specific to their business.

The Middle Ground: Shared Responsibility

Some leases split buildings insurance between landlord and tenant. For example:

• The landlord insures the core structure and common parts.
• The tenant insures fitted-out areas (kitchens, partitions, specialist installations they've created).
• Both carry liability, sometimes with agreed limits.

Mixed-use properties often work this way. A three-storey building with residential flats above and a shop below might see:

• The landlord insuring the whole building structure.
• The residential tenants insuring their contents and public liability.
• The shop tenant insuring their stock, fittings, and business liability.
• A separate block insurance policy for the common parts (entrance, stairs).

This can get complicated, which is why a broker's help is often valuable.

Why The Lease Matters

The lease is a legally binding contract. It says who insures what, who pays, and sometimes what type and level of cover is needed. Many leases require the tenant's insurance to be in place before they take possession, failing to arrange it by the move-in date can breach the lease.

Some leases are very specific: they might demand that buildings insurance is "comprehensive cover with a maximum excess of £5,000" or that liability insurance must be at least £10 million. Others are vague, which creates disputes.

Common lease clauses:

• The tenant must not do anything that would invalidate the landlord's buildings insurance (e.g. change the use of the property without telling the insurer).
• The tenant must reimburse the landlord for insurance premiums within 30 days of invoice.
• The tenant must provide proof of their own insurance (usually a certificate of insurance) within a set timeframe.
• If the tenant fails to arrange insurance, the landlord can do it and bill them for it.

Misread the lease, and you can end up paying for cover you didn't know was your responsibility, or assuming you're covered when you're not.

A Practical Checklist

Before you take on a commercial property (as landlord or tenant), work through this:

• Read the lease carefully. Highlight the insurance clauses. If you don't understand them, ask your broker.
• Identify the property type. Is it a single-use building, mixed-use, or a unit in a larger complex? This affects who insures what.
• List the buildings. Are you responsible for the main structure, fitted-out areas, common parts, or all three?
• List the contents and liabilities. What are you storing, selling, or doing on the property? What could go wrong?
• Check any previous insurance. If you've taken over from another tenant or landlord, don't assume their policy is right for you.
• Get it in writing. Once you've agreed responsibility with your landlord or tenant, confirm it in an email or addendum.
• Arrange cover before the lease starts. Don't assume a grace period; insurers often date cover from the inception of your occupation.
• Keep proof of insurance on file. Have a copy of the schedule and certificate of insurance for every policy you hold or are named on.

What Happens If The Wrong Person Is Insured

On a full repairing and insuring (FRI) lease, the tenant may be responsible for arranging or contributing towards the buildings insurance, depending on the terms of the lease. The important point is that the buildings policy should properly reflect the interests and obligations of both parties.

Where the tenant arranges the buildings insurance, the landlord's interest may need to be noted on the policy, or the policy may need to be arranged in joint names. This helps ensure the insurance reflects the contractual relationship and the interests of the parties with responsibilities for the property.

Conversely, a tenant who assumes they are fully protected under the landlord's buildings policy should check that the policy also adequately addresses their own interests and responsibilities. Their stock, equipment, improvements and fixtures may require separate or additional cover depending on the lease and the nature of the property.

These details can become particularly important when a claim occurs. Reviewing the lease and insurance arrangements in advance can help identify gaps before they become a problem.

This is where a broker can help. We've spent over 50 years helping London-based and UK-wide commercial property owners and occupiers navigate these obligations. We work with over 100 UK insurers and MGAs to find policies that reflect your exact responsibilities, whether you're a landlord, a tenant, or both.

Get Clarity On Your Responsibility With Ellis David

Commercial property leases vary widely, and responsibility for insurance can differ from building to building. If you're not sure whether you're meant to be arranging buildings insurance, contents cover, liability, or all three, don't assume. A misunderstanding can leave you uninsured.

Ellis David has over 50 years' experience helping commercial property owners and occupiers in London and across the UK get the right cover in place. We work with over 100 UK insurers and MGAs, and we take time to understand your lease terms, your property, and your business before we recommend cover.

Talk to us about your commercial property insurance needs

Commercial Property Insurance: FAQs

If my landlord has buildings insurance, am I covered if something goes wrong inside the building?

No. Buildings insurance covers the structure and permanent fixtures. It doesn't cover your own stock, equipment, or personal liability as a business operator. You need separate contents and liability cover.

Can I assume my lease doesn't require insurance if it doesn't mention it?

No. Most commercial leases do require insurance; silence usually means you should check with your landlord or a solicitor. The risk of being uninsured is yours.

Who should be named on the insurance policy?

That depends on the type of cover. Buildings insurance should name the landlord (or the property owner). Contents insurance should name the business or occupier. Liability insurance should name the person or entity responsible for the activity that creates the risk. Your broker can advise on the exact naming.

What if my landlord's buildings insurance doesn't cover my fitted-out areas?

Some landlord's buildings policies exclude improvements and alterations made by the tenant. Your lease may state that the landlord insures the property "as originally built", while the tenant is responsible for insuring subsequent alterations and improvements.

In this situation, the tenant can arrange cover for their improvements under their own insurance policy. This is particularly relevant for retail, hospitality and food service businesses where significant investment may have been made in fitting out the premises.

Can I buy one policy that covers everything?

In theory, one insurer can bind multiple covers, buildings, contents, and liability, under one master policy. But you still need different insurances because they cover different perils and different parties' interests. A package policy can simplify admin, but it doesn't remove the obligation for each party to hold appropriate cover.

What if responsibility isn't clear in the lease?

Speak to a broker. They can help you identify the gap, advise you on what's reasonable to offer to take on, and arrange the right cover once you've agreed with your landlord or tenant. It's far cheaper to clarify upfront than to argue over liability after a loss.