REALWorld Law

Commercial leases

Insurance

Who pays the cost of insuring the real estate which is the subject of a lease and what events causing damage will usually be covered by the policy?

Germany

Germany

In most cases the landlord insures the leased property and the tenant reimburses him for the cost or, in the case of a multi-let building, an appropriate proportion of the cost via the service charge.

Building insurance usually covers, as a minimum, damage caused by fire, water supplies (eg overflowing of taps, burst pipes) and hail or storm. Both terrorism insurance and loss of rent insurance are also available in Germany. In the case of terrorism insurance, the costs can be passed on to the tenant (according to recent case law) if the tenant is – as is usually the case – obliged to bear the cost of building insurance and if there are indications for a risk of terrorist attacks on the insured building. However, a decision by the German Federal Court of Justice is still outstanding. The costs for loss of rent insurance are not normally passed on to the tenants.