A recent decision of the High Court has shown that it is important for Landlord and Tenants to fully understand their respective rights under insurance policies for commercial premises.
As is customary under leases, most often the Landlord takes out insurances in respect to the leased premises and charges the costs of that insurance to the Tenant.
In the case 134 Limited v JRF Holdings Limited [2013] NZHC 938 the Tenant had spent a large amount of money in fitout and improvements before taking occupation of the premises.
The property was demolished as a result of the Christchurch earthquakes.
The High Court has held that the Tenant had a right to a portion of the insurance proceeds to compensate it for the loss of the remaining term of the lease.
In this particular case the insurance had an endorsement on the policy indicating the policy covered the respective interests of both the Landlord and the Tenant.
The High Court held that the loss of the remaining term of the lease was an interest of the Tenant and accordingly the insurance policy should be available to compensate the Tenant. On this basis a portion of the insurance proceeds were ordered to be paid to the Tenant.
Since the Christchurch earthquakes the issue of insurance has become far more relevant in the Landlord and Tenant situation. There are a number of considerations that should be taken into account and these can depend on not only the specific circumstances but also the nature of the lease documentation. It is also very important when entering into a new lease to fully consider the implications of insurance, who should be responsible for payment and the type of coverage.
We have extensive experience in all aspects of commercial leasing and can advise you fully in relation to any Landlord or Tenant issues.
If you require any advice or further information on the matters dealt with in this publication please contact the lawyer at Farry and Co. who normally advises you, or alternatively contact:
Paul Farry
09 379 0055 or 03 477 8870
The information contained in this publication is intended as a guide only. It does not constitute legal advice and should not be relied upon as such. Professional advice should be sought before applying any of the information to particular circumstances. While every reasonable care has been taken in the preparation of this publication, Farry and Co. does not accept liability for any errors it may contain.