The question of insurance is often a reoccurring issue when it comes to the procurement of fit-out works to a premises that forms part of a larger multi-let building.

Tenants need to consider insurance for the existing building and insurance for the fit-out works.

Whilst the agreement for lease or license to alter enables the fit-out works to be carried out by the tenant, the clauses which stipulate the insurance arrangements do not often reflect the practicalities of what and who needs to be insured.

Therefore, it is crucial that the landlord, the tenant and the fit-out contractor carefully address the issue of insurance as early as possible to ensure sufficient time for everyone to reach an agreement and put the necessary insurance in place.

The key issues

It is the usual position that the landlord insures the multi-let building.

Should parts of the existing structure of the building become damaged during the undertaking of fit-out works by a flood or fire, for example, the reinstatement costs can be extensive, particularly if the building in question is a high-value city skyscraper.

Such reinstatement costs can be significantly disproportionate to the value of the contractor's work for that particular job.

The fit-out contractor, therefore, needs to ensure that it has adequate protection in place to protect them from the risks associated with the existing structure of the building.

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