Owning a property with tenants is a complex endeavor. When you have developed a property for commercial use, the details you need to monitor are multiplied.
While many of your expectations are standard for any property owner, making sure your property and your tenants are safe and properly insured can be a daunting task. For this reason, it is important to know what your tenants are doing on the premises.
Depending on the size of the property you are leasing, you may have multiple tenants running your business from your property, and your commercial landlord's insurance may be complicated. It is very likely that when they started renting out your property, you knew the nature of the company and were able to report risks to your insurer. However, how much do you know about your tenants now?
Understanding what is happening to your property is not unreasonable, nor does it violate any privacy law. In fact, under the Insurance Contracts Act 1984, Australian law requires you to tell your insurance company what you know or can reasonably be expected to know about the activities of your tenants.
Why should I know everything about my tenants' activities?
In order to provide the right price and appropriate coverage, your insurance professional must understand the risks associated with your different tenants. In some cases, your rates may go down, in other cases the price you pay for your cover may go up, in some cases, the risks associated with the business make the business uninsured for some companies.
For example, you own a small development and rent most of your space to several specialized retailers. All stores have minimal risks. However, if a company that specializes in barbecue wants to move forward, you will be at greater risk due to flammable elements. The gas needed for the girls can destroy or damage all the units in your property. In addition, the nature of the business increases the likelihood of a claim.
What if my tenant companies' information is incorrect?
The most important consequence of misinformation about your tenants' business dealings is the denial of an insurance claim. Denying a claim because the relevant information is incorrect may not always be the case. However, insurance companies have the right to refuse the application. Australian law states that insurers must have an accurate and complete disclosure of all relevant facts about the property and its use.
Example case studyLee owns a sandwich shop. When he entered his lease, Lee intended to offer cold sandwiches, salads and desserts. There will be no reason to cook on campus. The property owner reported this information to his insurance provider, and coverage rates are set based on the store that does not have cooking.After a while, Lee's customers order fried foods, and he buys a professional deep fryer. Lee does not think this is relevant information and does not notify the property owner. One night an employee accidentally leaves Frere, and Lee's shop, as well as shops on both sides, are badly damaged.When the insurer finds out that the fire was caused by a deep fryer, the company denies the claim. Not only will Lee not receive compensation for his losses, but neither will the neighboring units nor the property owner.
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Failure to report changes in the way a business operates can be a costly mistake.