#10232 - Repair Insurance Leases Model Answer

Clause 4 – Tenant covenants to observe Tenant’s Covenant
Clause 4.5.1 –Mini Mee covenants to keep and maintain the Unit in good and substantial repair and condition (Excluding damage covered by the Insured Risk)
Clause 4.5.2 –Mini Mee covenants to make good any disrepair (within 3 months)
Clause 4.5.3 – Self Help Clause
Clause 1.1 Definitions – Defines “Unit” as Unit 3 of the Centre.
Clause 1.1 Definitions – Defines “Centre” as Oak Lane Shopping Centre.
Clause 1.1 Definitions – Defines “Insured Risks” – state that it does (e.g. pipes, malicious etc..)/does not cover the damage e.g. Acts of God.
Clause 6.2.2 (Tenant’s Insurance Covenants)– Tenant Covenants to give LL immediate written NOTICE on become aware of circumstances that may lead to an insurance claim.
Clause 6.1.1 (ii) (The Landlord’s Covenants) – Landlord covenants to insure against loss or damage by the Insured Risk.
Clause 6.1.5 (The Landlord’s Covenants) – Landlord covenants to reinstate as qucly as reasonably practicable if any part of the Centre is destroyed or damaged by an Insured Risk (subject to Mini-Mee’s fault).
Clause 6.2.1 (i) (Tenant’s Insurance Covenants)– Tenant pays an Insurance Percentage of the Insurance under 6.1.1 (within 10 days at LL’s demand)
Clause 1.1 Definitions – Defines “Insurance Percentage” to be 4.5%

What happens if Insurance pays out?

Clause 4 – Tenant covenants to observe Tenant’s Covenant
Clause 6.1.5 (The Landlord’s Covenants)– The LL has an obligation to reinstate (bring Building to a state where Mini Mee can continue to occupy the Unit as intended under the terms of the lease) the Centre or any part of the Centre that has been destroyed or damaged by the insured risks.

Clause 6.1.2 (The Landlord’s Covenants)– to insure against loss of the Principal Rent payable under the Lease arising from damage to the Unit by the Insured Risk for 3 years.
Clause 1.1 Definitions – Defines “Principal Rent” 32.550 pa
Clause 6.2.1 (ii) (Tenant’s Insurance Covenants)– Tenant to pay all the amount which LL spends on insurance pursuant to Clause 6.1.2 (within 10 days at LL’s demand)
Clause 6.3 Full rent suspension if Centre’s insurance pays out due to the Centre or part of the Centre being damaged due to Insured Risks until the Building is fixed or the Insurance money is exhausted.
No clause that states Mini Mee has to tell Insurance about any event that effects the Insurance Policy, but under Clause 6.2.5 Mini Mee covenants to comply with the requirements of the insurers.
Clause 6.4.1(i)– if reinstatement takes longer than 2 years from date of damage or destruction LL to inform within 6 months of date of damage.
Clause 6.4.1(ii) – if LL gives Clause 6.4.1(i) notification either party may terminate the lease by written NOTICE.
Clause 6.4.2 – if Loss of Rent is exhausted (3 years) either party may terminate by written NOTICE.
Applying the above provisions to the facts, if the Cetre/Unit are not restored at the end of the 3 year period Mini Mee will have to start paying rent once again.

What happens is Insurance does not pay out fully/at all?

Clause 4 – Tenant covenants to observe Tenant’s Covenant
Clause 6.2.3 (The Tenant’s Covenants) – MM covenants not to cause the insurance to be invalidated or the premiums increased.
Clause 6.2.4 (ii) (The Tenant’s Covenants) – MM must pay for any damage or destruction if the policy has not paid out fully or in part due to something MM did
Clause 6.2.4 (i) (The Tenant’s Covenants) – MM covenants to pay any increase premium or costs incurred by LL as a result of breach of clause 6.2.3..
Clause 5.12.1 – If Insurance pays out a bit, the rent will be suspended for a fair proportion according to the nature and extent of the damage sustained.
Clause 4.13.1 (The Tenant’s Covenants) – MM covenants to get LL’s written Consent if wants to obtain Planning Permission to affect the Unit.

Replacing, decorating & Landlord’s NOTICEs to repair decorate etc

#10232 - Repair Insurance Leases Model Answer - Property Law and Practice