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Burton and Co Blog

The latest news in the legal arena, and how it affects you.

Earthquake strengthening and insurance premiums

Carolyn Cameron - Wednesday, September 05, 2012

Further to our earlier comments in relation to earthquake prone buildings the market is now seeing the practical commercial fallout from the increasing focus on earthquake prone buildings.

Reports are filtering through of insurance premiums rising dramatically - in some cases by more than 600% where the buildings are circa the 1900's.  Most commercial leases pass the cost of insurance premiums through to the tenant as an outgoing meaning the tenant is being asked to meet these increased costs.  This is in turn causing some tenants to look to move premises as and when they can.

The improvements rent provisions under leases are also being dusted off and looked at quite closely.  Where Council is requiring substantial upgrades to buildings, tenants may be liable for a share of the costs incurred by the landlord through improvement rent provisions.  Again these types of additional expenses are likely to be an unexpected and certainly unwelcome surprise to tenants putting additional financial pressure on tenants in already tough times.  Whilst these factors are probably yet to be reflected in most market rents that must surely be next.