You may be wondering what your rights are as the tenant and whether
your Landlord can procure any insurance policy he wishes, at any cost and
expect you to pay the bill.
I hope today’s blog will clear things up a little for you.
Let’s start with the basics first:
Where is your lease?
If you have a lease make sure you have a copy. Make sure it is a copy
of the actual signed lease and not a draft. Print it out so you can annotate it
and keep it in a safe place where you can lay your hands on it.
If you don’t have a lease but you are paying money to your Landlord
(and there are many NHS occupiers like this at present,) this does not mean you
don’t have a lease, it means you have a lease in Common Law. Believe it or not it is possible to have a
lease without having anything on paper. It can make things slightly more tricky
and is not ‘best practise’ for Landlords, but is more common then you imagine, particularly
in NHS shared premises.
Why have a lease in the first
place?
Leases are generally a good thing to have because a lease is a contract
that sets out the terms of the arrangement for your occupation of a property -
so each party knows where they stand. In the commercial world it also is a
document that protects tenants from being ‘thrown out’ on no notice – so affords
safety in business continuity. It also enables
Landlords to forecast contractual rental income. Landlords are agreeable to getting leases in
place as it means they can borrow money from the bank against this guaranteed
income – or if they have already borrowed the money, they can arrange to pay it
back on preferential terms.
What sort of occupier are you?
GPs
If you are a GP Practise then I refer you to ‘The National Health
Service (General Medical Services – Premises Costs) Directions 2013. Part 5 covers ‘recurring Premises costs’. At
Section 46 you will find the detail of ‘Payments in respect of running costs’.
This section basically provides you with the detail of what you will
get reimbursed for under your GMS contract – including insurance. However under
Section 47 you will see that you may, depending on the circumstances, only
receive part payment of the cost of the service charges for your premises. Furthermore, there are lots of costs that may
be included in your actual service charge bill, that are not re-reimbursable
under these Directions.
This means that it is in your Practise’s financial interest to
minimise, where possible, these particular payments to your Landlord. This doesn’t
mean that you refuse to pay for your insurance and service charges – but it
does mean you should be seeking for transparency of these charges, to ensure
they are 100% clear, justified and accurately reflect the lease contract.
Clinical Service Provider and
charities
If you are providing a service/ charity work from an NHS property,
then quite often you will want to know where you stand with using a property
for the purposes of business planning. For
charities, under the Charity Commission rules, you will be aware that you must
seek value for money when undertaking business and this means you need to be
prudent when it comes to dealing with your financial undertakings – and therefor
when dealing with your accommodation costs.
So how is your insurance bill
arriving?
Some Landlords wrap the rent, insurance and service charge into one
single bill. Others split out the invoice completely and send it on an invoice,
quite separate from the Rent and service charge invoices.
There is no hard and set rule about how you should receive your
insurance bill for your property. However
this is what you need to know:
Your lease is key to setting out the basis of the insurance that your
Landlord procures on your behalf. So if you have a lease – flick through with a
highlighter and mark every single element which refers to insurance.
Most leases will have an insurance schedule located towards the back
of the lease document and there will be a clause nearer to the front of the
lease which sets out what you, as the tenant, must pay under the lease
contract. Often it will say ‘the tenant
will pay for the costs buildings insurance as set out in Schedule X’ – and this
will be the respective Insurance schedule at the back of the lease.
Tenants proportion?
In terms of the proportion of the bill that you must pay – this can be
quite a complex issue – so I will save that for another day – so watch this space.
FSA Regulation of Insurance
Over recent times, EU Directives have led that most areas of insurance
are now regulated by the Financial Services Authority (FSA). You can check here
to see if your Landlord / their nominated managing agent should be registered
with the FSA
Quite often, commercial Landlords will be deemed as registerable under
the FSA if they are ‘acting in the administration and performance of
a contract of insurance’.
What does this mean?
Most Landlords need to be registered by the FSA if they are involved
with the procurement of insurance products for tenants. If they are registerable under FSA rules then
they fall under the ‘Treating Customers
Fairly’ principles. So even if it
does not say explicitly in the lease, it is reasonable for you, as the tenant,
to ask for a copy of the insurance that has been procured on your behalf plus
details of all the costs involved in its procurement.
So when you get a bill for insurance – make sure you contact your Landlord
and ask for:
Details of their FSA registration. A copy of the insurance policy.
Details of all costs being claimed (this includes any brokers fees.)
Once you have a copy of your insurance you need to check that the
cover accurately reflects the cover that is set out in the insurance clause of
your lease contract. This is because the
landlord must ensure that the insurance they have procured falls squarely
within the scope of your lease. If the
policy does not comply with the lease contract, then the Landlord may not seek
reimbursement from you, as his tenant.
Can the Landlord use any
insurance company he likes?
The short answer for commercial leases is yes. The lease contract must
be used as the basis of this arrangement, however, the Landlord is under a
Common Law duty to ‘act properly’. Current case law has seen that it is not necessary
for the Landlord to go out and get the cheapest deal, but Landlords do have to
undertake the exercise of procuring the insurance ‘at arms length’ and the rate
charged should be no more than the chosen insurer’s going rate for the policy
in question.
Can the Landlord take a
commission?
Unless the lease says otherwise, it’s generally accepted that the
Landlord or his managing agent should not profit from placing insurance
products without the Tenant’s consent. This means the Landlord should really
give the Tenants the benefit of any discount they might receive and be
transparent about this aspect.
What about broker’s fees?
The issue of broker’s fees has come up with a situation I have been
dealing with recently. I have not been able to find much detail on this in
terms of legal cases (yet), but where the lease does not mention that the cost
of insurance brokers fees is rechargeable to a tenant, then I would be arguing that
the broker’s fees are something that the Landlord has to pay and that these
specific costs cannot be demanded. Clearly, if I discover information to the
contrary, I will update this blog.
Supply of Goods & Services
Act
What I have established is that there is case law in 1994, the
arrangement by insurance by the Landlord is not something that is caught by the
Supply of Goods and Services Act 1982.
So that’s the end of this blog for now. Will do another soon.
I believe it is £20 if you are not an RICS member
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