When a lease requires the tenant to pay the landlord’s cost of insuring the premises, the relevant clause will usually refer back to the landlord’s covenant to insure.  For example, “the tenant will pay the landlord’s cost of insuring the premises in accordance with clause X”.  This makes sure that all of the landlord’s costs are recoverable. 

A recent case has shown that such a clause requires the landlord to follow its covenant to the letter if it is able to insist on payment by the tenant.

The case involved a ground floor shop with three flats above.  The landlord was required to insure the building in the joint names of the landlord and the tenants.  Each tenant paid one quarter of the cost of the building insurance premium.  Originally the certificate of insurance showed the landlord as the insured, included a general interest clause and noted specific interests.  For the last three years no specific mention was made of one of the tenants, Ms Green.  She claimed she was not liable to pay towards the premiums as the landlord had not complied with his covenant to take out the policy in joint names.

The Upper Tribunal (Lands Chamber) held that in order to be entitled to recover payment from Ms Green, the landlord had to show that it had placed insurance in accordance with the relevant clause in the lease.  The Tribunal appears to have accepted that noting of special interests was sufficient to satisfy any lease with joint insurance obligations (although many may argue this point).

Placing insurance in the name of the landlord with no mention of the tenant’s name and relying on a general interest clause was not, however, sufficient.  Ms Green was therefore only liable to pay for those years when her interest had been directly named on the insurance policy. 

This case reminds us that in order to be able to enforce payment of insurance rent from their tenants, landlords must follow insurance covenants to the letter. 

Law:  Green –v- 180 Archway Road Management Co Ltd [2012] UKUT 245 (LC)