Insurance

You might have to directly pay a portion of the insurance, especially if you have a net lease. Review a copy of the landlord’s insurance policy to adjust your own as necessary. Issues to consider:

• Does the landlord’s policy cover your use of the space and activities?
• What are the limits to the amount of insurance carried by the landlord?
• Will you be notified if the landlord’s policy lapses?
• Does the landlord’s policy cover other properties as well? If so, does this affect how claims are made?
• Are there caps on the number of incidents that will be paid each year by the landlord’s insurance provider? If so, how does this affect your space if the policy has reached its yearly maximum and an incident occurs? Who pays?

As with utilities, insurance charges may be based on the percentage of your space, or the landlord might use another method to divide insurance costs among tenants. This is fine if the entire establishment is rented by similarly-sized spaces or uses, such as all one-person studios. However, this can become problematic if leased spaces vary widely in size and use.

For example, what if your studio is in a mixed-use building in which the first floor contains two galleries, an arts gift shop and a restaurant, while the top two floors consist of artist live/work spaces? Although the top floors have little contact with the public, the foot traffic created by the restaurant and gift shop increases the liability insurance of the overall building. While these businesses are generally required to carry additional insurance to cover their activities, your rent could be impacted.

In a net lease, costs could be passed on to you directly by high insurance fees or -- if you have a gross lease -- higher rents. Again, negotiate for other cost-reducing clauses to ensure you don't overpay for use of your space. For more information about insurance issues, see Chapter 20: Insurance.