A commercial property investment can provide an ideal home for your business or a valuable rental yield. So what are the risks that can come with a commercial property purchase? Whether you’re buying an office space or an industrial block, here are two key types of insurance worth considering.
Commercial property insurance
At its essence, commercial property insurance traditionally provides cover against physical property damage. Typically, this might cover against floods, fire, explosions or earthquakes, as well as accidental or malicious damage. You can sometimes combine this insurance type with business or landlord insurance to make life simpler and gain cover for a range of risks:
• A business insurance package may be a suitable option if you’re the owner-occupier of your commercial property. Generally speaking, this insurance type can include cover for business and property risks such as physical damage, business interruption, burglary, public liability and employee dishonesty.
• Commercial landlord insurance may be a suitable option if you’re leasing your commercial space out to a tenant. This insurance type can include cover for physical property, public liability and tenant issues, such as damage by tenants, eviction costs and loss of rental income caused by damage to the property.
Of course, there are also some additional risks that can arise whether you’re a landlord or owner-occupier – and here’s where commercial title insurance comes in.
Commercial title insurance
This type of insurance provides cover for a range of commercial property ownership risks that might not be immediately obvious, but can become costly and inconvenient if they do arise. Commercial title insurance can provide cover for aspects such as:
• Taxes, charges and levies
Responsibility for charges, taxes and levies can be passed to the new owner of a commercial property, even if the new owner didn’t incur them. This could include levies such as parking space levies, or levies for industrial waste. Another example, might be where a developer is building commercial buildings, and becomes responsible for miscalculated GST and capital gains tax during the sale period.
• Legal right of access
Pedestrian and vehicle access can be essential to the successful use of many commercial properties, but it might surprise you to learn that many commercial conveyancing transactions take place without a boundary survey being conducted. Occasionally, an owner might discover after purchase that they don’t have legal right of access to their property.
• Competing interest claims
Competing interest claims can be an issue with commercial property, and it can be a true headache to find out after purchase that someone is claiming a legal right to use all or part of your land, such as having access to your land or having the right to occupy the property.
• Unapproved building works
If you purchase a commercial property such as an office or retail space, it’s entirely possible that a previous tenant might have completed fit-out works. If these works were not approved by the relevant authority, you could potentially make a title insurance claim if non-compliance was noted in the Public Records on the Policy Date.
Encroaching structures built on your land
Issues can arise if it becomes apparent that someone has built a structure such as a building (other than a boundary wall or fence) on your commercial property without your consent or knowledge.
First Title is here to help if you are considering title insurance for commercial property, and can provide assistance and financial cover for these issues should a successful claim be made with your policy. You can get a quick quote to see what this type of commercial property insurance costs, and request cover if you’re ready to arrange protection for these property ownership risks.
It’s worth remembering that as well as providing additional peace of mind that your property is protected, insurance premiums are claimable as a tax deduction for many commercial property owners. It’s always worth speaking with your tax professional to be sure about what you can claim.
