A Real Estate Purchase Agreement governs the sale and transfer of property ownership between buyer and seller. This playbook covers due diligence, contingencies, and closing mechanics.
Why This Matters: Insufficient or lapsed insurance leaves parties exposed to uncovered losses. Clear requirements ensure financial protection against property damage and liability claims.
Negotiation strategy
If you're the Buyer:
Ensure that the Tenant provides proof of adequate insurance coverage before the lease commences. Require that the Landlord is named as an additional insured to protect against potential liabilities.
If you're the Seller:
Negotiate for reasonable insurance coverage limits that align with industry standards. Ensure that the cost of insurance is manageable and does not impose undue financial burden.
Essential elements
1
Property Insurance
Covers physical loss or damage.
2
Liability Insurance
Covers bodily injury and property damage.
3
Business Interruption Insurance
Covers loss of income during interruptions.
Action framework
ACCEPT
Propose edits if coverage limits are insufficient or if additional insureds are not properly named.
EDIT
Reject if the insurance requirements do not meet minimum industry standards or expose the party to significant risk.
ADD
Add specific endorsements or higher coverage limits for high-risk properties or operations.
PRO TIP
Always verify that the insurance policies include a waiver of subrogation in favor of the Landlord.
Example clauses
FAVORABLE
Comprehensive Insurance Coverage
"The Tenant shall maintain, at its sole cost and expense, the following insurance coverages during the term of the lease: Property Insurance, Liability Insurance, Business Interruption Insurance."
NEUTRAL
Basic Insurance Clause
"The Tenant shall maintain insurance as required by the Landlord."
UNFAVORABLE
Inadequate Insurance Coverage
"The Tenant may choose to maintain insurance at its discretion."
Fallbacks
High-Risk Properties
For properties with higher risk profiles, such as those in flood zones, additional insurance coverages like flood insurance should be mandated.
Short-Term Leases
In short-term leases, consider adjusting the insurance requirements to reflect the reduced duration of risk exposure.
Multi-Tenant Buildings
In multi-tenant buildings, ensure that each tenant's insurance policy includes a clause preventing claims against other tenants.
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