When raising finance on your commercial property asset bear in mind that a lender will have specific requirements for securing their interest through your buildings insurance policy. Lender requirements can vary from a simple noting of their interest at one extreme, to being named as first loss payee, composite insured and possibly even a full assignment of the policy at the other. It is important to appreciate your prospective lender's needs at an early stage so that these can be considered and catered for allowing you to minimise any potential delays to your transaction.
Some points to note are:
- Will the lender's requirements conflict with the terms of any lease under which you hold the property and if so how can those differences be resolved?
- Your nominated insurer may not be willing to agree some of the more stringent lender conditions (such as being composite insured or having the insurance policy assigned) which may mean you need to look to other specialist insurers.
- Your insurer is likely to charge an additional premium for amending and widening insurance cover and hence their exposure.
Take early advice from your legal advisors on your chosen lender's insurance requirements (which will be set out in their facility agreement) and speak to your insurance broker who will be able to advise on the most appropriate insurers to approach and then negotiate terms for you.