12 months Indemnity Period for a property owner simply doesn’t cut it By Allan Manning June 20th, 2016
I read this morning that the un-occupancy rate in Perth and other mining towns around Australia are significantly lower than they were just a few years ago.
For any client who has a good tenant in their premises, perhaps on a lease that had been signed up at the peak of the mining boom, should more than ever be considering the Indemnity Period that they have on their loss of rent/gross rentals cover.
With any significant loss, it is going to take more than 12 months to get council approvals, trades in place and the reinstatement completed. If the tenant abandons the lease, the length of time it will take to get in a new tenant, albeit at a lower rental will need to be considered.
Another consideration would be the level Additional Increase in Cost of Working. It may be prudent to pay trades over time to get the building reinstated quicker and there may be a necessity to have some sort of rent inducement, such as a rent free period, to attract a new tenant within in the indemnity period.
The take away point from this article is that while 12 months may be a traditional standard for Indemnity Periods, it is in my experience not adequate to fully protect an insured in the event of a major loss, bearing in mind that I have not even raised the issue of disaster situations, and each risk should be considered on a case by case merit using my personal adage of ‘hoping for the best, but planning and insuring for the worst’.
